“ Seniors should not pay taxes on Social Security ,” Trump declared on his social media site , Truth Social , back in late October when he was still a candidate . After that , his campaign went radio silent on the tax cut , though he has said in stump speeches that he has no plans to cut benefits or raise the eligibility age for Social Security benefits .

In fact , slashing taxes on Social Security benefits would cost $ 1.5 trillion over 10 years , which would not only speed up the insolvency of the Social Security trust funds , but also greatly favor the wealthy , according to analysis from the Tax Policy Center , a nonpartisan think tank in Washington , D . C .

While millionaires would get the bulk of the tax cut benefits , no lower-income households and just one quarter of middle-income taxpayers would reap any tax savings at all , according to the center ’ s analysis .

Such a tax cut “ might be worth doing if the increase in net income was well targeted to those with modest or low income who need extra support , but this would send a disproportionate net increase in income flowing to the rich ,” says Henry J . Aaron , an economist at the Brookings Institution and former chair of the Social Security Advisory Board under President Barack Obama .

The Tax Policy Center had several takeaways on the proposed tax cuts to Social Security benefits :

• Fewer than 1 % of low-income taxpayers ( those earning approximately $ 33,000 or less annually ) would get a tax cut .

• Only about 28 % of middle-income households ( those earning between $ 32,000 and $ 60,000 annually ) would get a tax cut , averaging about $ 90 a year .

• The top 0.1 %, or those making $ 5 million or more annually , would see the largest tax cut — an average of nearly $ 2,500 per year .

• Trump ’ s plan to slash taxes on Social Security benefits would lower taxes on U . S . households by an average of $ 550 .

“ While a large portion of the U . S . population is unhappy to pay taxes , I don ’ t think there was ever any real understanding of who would benefit and who would not ,” Aaron adds .

Beyond tax cuts for the wealthy , the Committee for a Responsible Budget released an analysis that says the optics on the cuts are bad for the Social Security trust funds ’ solvency as well . Both funds are currently projected to run out of reserves by 2035 , at which point there will be only enough incoming revenue to pay 80 % of benefits , according to the most recent Social Security Trustees Report .

When Trump ’ s proposed tax cut on benefits is factored in , the program ’ s retirement trust fund bankruptcy date is pushed up to 2032 from late 2033 , according to the Committee for a Responsible Federal Budget . Medicare ’ s insolvency date would fast-forward by six years , to 2030 , the think tank found .

“ By reducing Social Security and Medicare hospital insurance revenues by $ 1.5 trillion over the next decade , Trump would drive both programs into insolvency faster , resulting in sharply reduced benefits for tens of millions of recipients ,” said Howard Gleckman , senior fellow at the Tax Policy Center , in a recent blog .

Jeremy Keil , a CFP with Thrivent in New Berlin , Wis ., who specializes in Social Security , predicts Trump ’ s proposed tax cut on benefits won ’ t pass . “ Great sound bite , horrible policy ,” he says . “ The Social Security trust funds have enough problems to deal with without touching tax revenues .

The top 0.1 %, or those making $ 5 million or more annually , would see the largest tax cut — an average of nearly $ 2,500 per year .

“ The number one question I got when Trump was elected was : ‘ Will his proposed Social Security benefit help me ?’” says Keil , who noted that every one of his clients is either collecting Social Security or will be soon .

“ Many people don ’ t pay taxes on Social Security , but for those who do , I said ‘ Absolutely , it will help you today , but you tell me if it will help you in the future ,’” adds Keil , who then showed clients how the taxes are used to shore up the trust funds and their benefits . “ Not one has mentioned the tax cut again ,” he says .

— Tracey Longo

JANUARY / FEBRUARY 2025 | FINANCIAL ADVISOR MAGAZINE | 13