As the election fast approaches, you may wonder where former President Donald Trump and Vice President Kamala Harris stand regarding the future of Social Security and Medicare. Retirees and those dreaming of one day being retirees are worried about how they can afford to maintain their living standards as they age. A watchdog warns that Trump’s plan could cause a one-third drop in benefits, which would be devastating for millions of Americans.
A recent Nationwide Insurance survey highlights that almost three-fourths of adults have serious concerns about Social Security running out of money during their lifetimes. While our country is divided politically, Medicare and Social Security concerns are nonpartisan issues. The same is said for many Americans’ concerns about how they will afford to retire.
Shockingly, nearly one-fourth of respondents said they don’t expect to receive anything from Social Security. Remember, you have likely paid money towards our future Social Security benefits from every paycheck. Put another way, you’ve paid for this benefit and deserve to get what you’ve been promised.
Considering that Social Security and Medicare have been barreling towards insolvency for years, it is not surprising that the future of these important programs is a key issue in the 2024 presidential election. Here are some of the ways the two candidates plan to help or hurt these programs.
Trump Claims The Economy Will Grow Enough To Fix Social Security And Medicare
Former President Donald Trump has expressed a commitment to keeping Social Security and Medicare benefits. Although he claimed he would keep these programs, he outlined other proposals that could hasten the demise of full Social Security and Medicare benefits. He has stated he will “fight for and protect Social Security and Medicare with no cuts, including no changes to the retirement age.”
However, watchdogs expect that his plan to implement tariffs, mass deportations, and tax cuts would cause a 33% reduction in Social Security benefits by the year 2035 unless Congress steps in and passes new legislation to shore up the program. Shoring up the program likely requires raising taxes, reducing benefits or a combination of both. More importantly, what do you think is the likelihood of Congress passing legislation to cut Social Security or raise taxes without being in the middle of some crisis?
Trump has stated he has no plans to raise tax rates to increase funding for Social Security. In fact, he recently vowed to eliminate taxes on Social Security. I must point out that only around 40% of seniors owe federal taxes on their Social Security benefits. Typically, they are retirees with other substantial sources of retirement income.
Regarding Medicare benefits, a second Trump presidency could result in increased privatization to ensure benefits are available. However, we never saw much effort put into Trumpcare other than the efforts to repeal Obamacare.
Up To 33% Loss In Benefits Under Trump Plan For Social Security
According to a nonpartisan budget watchdog group, a four-year second presidential term from Donald J. Trump would drive Social Security into insolvency in three years and eventually require a slash in benefits by nearly a third.
The Committee for a Responsible Federal Budget estimated Trump’s plans and campaign promises of massive deportations, huge tariffs and further tax cuts for the rich would drain the proverbial Social Security trust fund by 2031 and lead to a 33% cut in benefits by 2035 unless Congress steps up with massive changes to the vital and popular program for retirees. This is a far bigger cut in Social Security benefits than the 23% shortfall after a decade projected under current law.
In case you were wondering, deportation would reduce the number of workers paying into the Social Security system and the total dollars flowing in to pay for the current benefits of those already retired.
Similarly, eliminating the tax on your Social Security benefits may sound great until you realize it may cost you one-third of your benefits, which is more than the tax rates paid by even the richest Americans on Social Security benefits. Don’t even get me started on what tariffs would do to inflation and the economy.
Kamala Harris Plans Could Increase Social Security Benefits
One of Vice President Harris’s key positions has been a strong commitment to avoiding cuts to Social Security and Medicare. She may even propose a plan that could help expand benefits.
In 2019, as the junior senator from California, Harris co-sponsored a Social Security reform bill—the Social Security Expansion Act—that would have increased minimum benefits and changed the plan’s cost-of-living adjustment calculation method to better reflect retirees’ modern economics.
To maintain or expand benefits, Harris’s plan would likely involve raising taxes to address the projected shortfalls of entitlement programs. Previous proposals from the Biden administration proposed modest tax increases on those making over $400,000. If elected, Vice President Harris could increase the amount of income that is subject to payroll taxes. The good news for workers is that your employer will pick up half the tab here. Currently, you will stop paying the 6.2% payroll tax on incomes above $168,600 (in 2024).
How Much Would Eliminating Taxes On Social Security Save You?
If you still love the idea of not paying taxes on your Social Security benefits, it may surprise you that it may not save you as much as you might think. The benefits for middle-class Americans would likely be much smaller than you imagine.
According to the Urban Institute and Brookings Institution’s Tax Policy Center, current Social Security recipients who earn between $32,000 and $60,000 per year save approximately $90 in taxes. That is like 25 cents per day. Don’t spend it all in one place.
To be fair, the top one percent of income earners who make $5 million or more would receive $2,500. Now, statistically, I’m guessing most people reading this post are not making anywhere near $5 million per year. Many won’t earn that amount their entire lives.
Also, keep in mind the lowest-income Americans earning less than $32,000 already don’t owe taxes on their Social Security benefits, so they wouldn’t see any additional tax savings from Trump’s plan.
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