Republican-backed legislation currently advancing through the House of Representatives includes a number of tax cuts that President Trump pledged during the campaign, including a significant cut in corporate interest rates and the removal of taxes on tips and overtime compensation for employees.
Trump’s proposal last year to exclude seniors from paying income tax on Social Security benefits is one tax relief that is not part of the measure.
The clause is still pending approval
The bill that was passed by the House Ways and Means Committee on Wednesday does not contain a provision that would remove Social Security taxes.
The legislation would proceed to the Senate if it passed the House. Along with a number of other short-term tax cuts, the plan would permanently implement the Trump tax cuts from 2017.
Maria Freese, senior legislative representative for the National Committee to Preserve Social Security and Medicare, explained that the exclusion from Social Security stems from the ban on making changes to the retirement program through the so-called reconciliation process, a legislative procedure that Republicans used to pass the bill.
He said that this procedure is a quick fix that circumvents the 60-vote threshold typically needed for a bill to move forward in the Senate.
According to him, trying to change the Social Security program through reconciliation would have been against the so-called Byrd Rule, which restricts what can be included in reconciliation laws and is named after the late Senator Robert Byrd of West Virginia.
The House version adds a new tax incentive for seniors—an extra $4,000 deduction for taxpayers 65 and older—instead of doing away with taxes on Social Security benefits.
It is referred to as the “enhanced deduction for seniors” and would be accessible to both itemizers and normal taxpayers.
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For the roughly 56 million Americans over 65, this might help lower their taxes.
According to the Social Security Administration (SSA), around 27 million persons, or 40% of Social Security claimants, currently pay federal income taxes on their payments.
According to Freese, “I’m sure a lot of older people would be quite disappointed if they had to keep paying taxes” on their benefits.
According to the group, in the absence of that revenue source, the Medicare trust fund would run out of money by 2030, six years ahead of schedule, and the Social Security trust fund would run out of money by 2032, one year sooner than anticipated.
“Automatic cuts for millions of beneficiaries,” the institute said, would be the outcome.
