Former President and current presidential candidate Donald Trump’s proposal to eliminate federal taxes on Social Security income has sparked a fresh wave of discussion among economists and senior voters.
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During an appearance on Fox Business Network, economist Steve Moore – co-founder of the Committee to Unleash Prosperity – echoed Trump’s sentiment. “The system right now punishes you if you continue to work,” Moore stated. “You have to pay income taxes, you’re gonna have to pay death taxes when you die, and you’re gonna have to pay a tax on your Social Security benefits. So, often, seniors are paying taxes on their income of over 50%. And so, I think Trump is onto something here.”
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Many argue that the current tax system is harsh on older Americans who choose to remain in the workforce. According to Moore, Trump’s idea to eliminate Social Security taxes is a politically savvy move. He says reducing the tax burden could encourage more seniors to stay employed.
Social Security benefits can be subject to federal income taxes, depending on a retiree’s overall income. According to the Social Security Administration, if your combined income is between $25,000 and $34,000 (for individuals), you may have to pay income tax on up to 50% of your benefit. If the combined income is more than $34,000, individuals could pay income tax on up to 85% of their benefit.
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Those numbers are a little different for spouses filing a joint return. With a combined income of $32,000-$44,000, they could pay tax on up to 50% of their benefit and 85% if the combined income is over $44,000.
For this purpose, seniors’ combined income is defined as their adjusted gross income, nontaxable interest, and half of their Social Security benefits.
While it’s understandable that seniors would appreciate less taxes and that many feel this is an undue burden on our senior population, others say that Trump’s proposal to cut Social Security taxes is fiscally irresponsible and would cause more harm than good.
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Garret Watson, a senior policy analyst at the Tax Foundation, wrote that “exempting Social Security benefits from income tax would increase the budget deficit by about $1.6 trillion over 10 years, accelerate the insolvency of the Social Security and Medicare trust funds, and create a new hole in the income tax without a sound policy rationale.”
As the 2024 presidential race ebbs nearer, Trump’s proposal will likely be a significant talking point, especially among senior voters who make up a sizable voting bloc. For seniors, the prospect of reduced taxes may be appealing. However, as with all tax policies, the devil is in the details. Voters must weigh the immediate financial relief they’d receive against the long-term sustainability of this and other essential programs for seniors.
Consider talking with a financial advisor to understand how certain policy changes could impact your financial situation.
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This article Economist Says ‘I Think Trump Is On To Something Here,’ Referring To The Presidential Candidate’s Pitch To Eliminate Taxes For Seniors originally appeared on Benzinga.com
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Source: finance.yahoo.com