Former President Donald Trump has proposed eliminating federal income taxes on Social Security benefits. While this might seem like a win for many retirees, a new study suggests that older, wealthier millennials would benefit the most. However, this change could also lead to financial risks for younger generations. Here’s a closer look at who gains and who loses under this plan.
Who Benefits Most from Trump’s Social Security Tax Plan?
Older, High-Income Millennials See the Biggest Gains
A report from the Penn Wharton Budget Model found that millennials in their 40s with high incomes would see the largest financial boost. These individuals could experience a lifetime welfare gain equivalent to a one-time payment of $12,400.
Biggest Winners: Wealthy Retirees
Retirees aged 70 in the top 20% of income earners would gain even more. Their lifetime welfare could increase by up to $43,600, making them the biggest beneficiaries of Trump’s proposed tax cut.
How Will This Impact Social Security?
Faster Depletion of Social Security Funds
The Penn Wharton report warns that eliminating taxes on Social Security benefits could accelerate the depletion of the Social Security Trust Fund by two years. This could lead to automatic benefit cuts in the future unless Congress takes action.
Younger Generations Could Suffer
While older, high-income individuals benefit, younger generations and future retirees could see major losses. The report estimates that unborn generations could face welfare losses between $11,700 and $22,000 due to the program’s financial instability.
Experts Weigh In
Concerns About the Plan’s Long-Term Effects
Maria Freese, a Social Security expert, argues that the plan could be dangerous for retirees. She warns that once the trust fund runs out, benefits could be cut by 17%, leaving many without adequate income.
Alternative Solutions Suggested
Nancy Altman, president of Social Security Works, believes Trump’s plan increases benefits in the short term but weakens the program in the long run. Some experts prefer Rep. John Larson’s Social Security 2100 Act, which proposes reducing taxes on benefits while also bringing in more revenue to strengthen the program.
What Happens Next?
Trump’s Social Security tax plan has sparked debate about whether it will help or harm retirees in the long run. While older, high-income individuals may benefit, younger and future retirees could face significant losses. As discussions continue, it remains to be seen whether this proposal will move forward or if alternative solutions will be considered.