President Trump Promised a Big Social Security Change. Here’s Why It May Not Happen

Social Security is an income source that millions of older Americans rely on during retirement. But the fear is that the program will soon face benefit cuts. And that fear is not unfounded given the program’s financial woes.

In the course of his presidential campaign, Donald Trump made it very clear that he’s not looking to cut Social Security. In fact, Trump actually wants to put more Social Security into retirees’ pockets. And he thinks the way to do that is by eliminating taxes on Social Security benefits.

But while that plan may be a well-received one, it may not be able to come to fruition for one big reason.

The downside to eliminating taxes on Social Security

Because so many seniors today rely on Social Security to cover their expenses, the taxes that apply to those benefits often deal retirees a huge financial blow.

The issue is that even relatively low-income seniors can be subject to taxes on their Social Security. That’s because the thresholds at which taxes apply were established decades ago and have not been updated to account for inflation or wage growth.

Retirees have to pay taxes on some of their Social Security benefits once their combined income exceeds $25,000 for single tax-filers or $32,000 for joint tax-filers. Combined income is calculated as the sum of adjusted gross income, nontaxable interest income, and 50% of annual Social Security benefits.

Getting rid of taxes on Social Security would put a lot more money in retirees’ hands. But the issue with doing that is the negative impact on the program’s overall finances.

Social Security is already facing the possibility of benefit cuts. And the reason is that its primary revenue stream — payroll taxes — is shrinking in the coming years as baby boomers retire in large numbers.

Right now, the program’s Trustees anticipate Social Security’s trust funds running dry by 2035. That gives lawmakers 10 years to try to come up with a workaround.

But while payroll taxes are Social Security’s main source of funding, the program also gets revenue from taxes on benefits. So if those go away, it could push Social Security even closer to insolvency. It could also potentially result in larger benefit cuts.

A change that may not happen

Though seniors would no doubt celebrate the end of taxes on Social Security benefits, the reality is that removing that income stream is a dangerous thing at a time when the program is desperate for revenue.

It may be that lawmakers will be able to put their heads together and come up with a way to prevent Social Security cuts. But until they have a more concrete plan, it may not be prudent to make any change that could take away funding the program needs.

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