After a Republican-backed tax bill garnered attention for a number of cuts, benefits are once again at the forefront of the political discussion. Is President Trump’s political team planning to reduce Social Security taxes?
One noteworthy feature of the bill, which is currently in the House and will affect a number of groups, especially seniors, is that, in spite of Trump’s campaign pledges, there is no proposed tax cut on Social Security benefits.
That promise is not fulfilled by the current tax bill; rather, it offers seniors a different kind of tax relief. What is it, then, and how does it operate?
Why the Tax Bill Doesn’t Include Social Security?
Included are a number of tax breaks, including lower corporate taxes and the removal of overtime and tip taxes. The clause to remove taxes on Social Security benefits is a conspicuous omission, though.
Maria Freese, senior legislative representative for the National Committee to Preserve Social Security and Medicare, said the legislative process is the cause of this exclusion.
The Byrd Rule is the reason Social Security changes were not included in the bill. This rule limits what can be included in bills that are passed through the reconciliation process, a streamlined procedure intended to get around the Senate’s customary 60-vote threshold.
This rule would have been broken if reconciliation proposals had been made to alter Social Security, which is why tax cuts that specifically target Social Security benefits were not considered.
While many seniors might have found it appealing to forego paying Social Security taxes, doing so would have had serious long-term effects on the program’s viability.
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Furthermore, experts warn that eliminating taxes on Social Security benefits could cause the trust funds for Medicare and Social Security to run out more quickly than is currently anticipated.
Significant budget deficits would result from this, necessitating automatic benefit reductions.
Instead, what have the Republicans done for the elderly?
In order to benefit seniors, the House bill includes a different provision—an additional $4000 deduction for those 65 and older—instead of doing away with taxes on Social Security benefits.
Along with potentially lowering the tax burden for approximately 56 million Americans over 65, this “enhanced deduction” would be available to both itemizers and those who take the standard deduction. It would also maintain one of Trump’s most significant voting groups.
