Donald Trump in his recent presidential campaign has repeatedly promised that he would not touch Social Security. But he also proposed to eliminate federal income tax on benefits, overtime and advice, which all provide funding from the social security program.
This is particularly consecutive because the program already performs annual deficits, so that the funds in social security trust, the source of service payments, can be exhausted in 2034. Services would be automatically reduced if this occurs. And any modification of the tax law which reduces the income of the program would only increase the problem.
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More specifically, the Committee for a responsible federal budget estimates that the end of the taxes on benefits, overtime and advice would accelerate the exhaustion of the three -year trustee and increase the size of subsequent services reductions. Here is what retired workers should know.
Social security Executes deficits since 2021, and losses should persist indefinitely unless the legislators intervene. The Congressional Budget Office (CBO) estimates that the trustworthy social security funds will be exhausted before 2035, when the remaining tax revenues would only cover 77% of the provided.
Above all, this does not mean that social security is bankrupt or that the advantages will cease. Instead, this means that social security will lose one of its three sources of funding. The trustee funds arouse interest because the assets are invested in cash obligations, but interest income will stop when the trustee funds are exhausted. This will leave social security with two sources of financing: (1) Taxes collected on pay and (2) Taxes collected on the advantages.
One of the trustee funds is insolvent, the CBO estimates that tax revenues cover only 77% of the payments planned in 2035. But the moment and the seriousness of the problem would change if President Trump's tax proposals became the law.
As mentioned, Social Security has three sources of financing: interests won over the assets of the trust fund (5%), taxes on services (4%) and payroll taxes (91%). The insolvency of the trust fund would eliminate 5% of the program's income, which represents around $ 70 billion in 2025. But changes in the tax law, such as those that Trump has proposed, would reduce other sources of income.
