"One of President Trump's key campaign promises centered on ending the taxation of Social Security benefits. This sounds good for seniors - in theory. After all, who wants to pay taxes if they don't have to? The only problem is, the taxes that are collected on Social Security benefits go back into the program's trust fund to help preserve Social Security's financial stability."
"Reforms in both the 1980s and 1990s resulted in some retirees being taxed on up to 50% of benefits and others being taxed on up to 85% of benefits. Those reforms were driven by a need to generate more revenue so the trust fund that's used to pay out benefits wouldn't run dry. Unfortunately, that trust fund is still in danger of running out. And, unsurprisingly, taking away the taxes that current retirees are paying would make that happen faster."
Social Security provides critical income for most seniors, and federal income taxes on a portion of benefits contribute revenue to the program's trust fund. Reforms in the 1980s and 1990s introduced taxation of up to 50% or 85% of benefits for higher earners to bolster finances. Removing taxation on benefits would eliminate an important revenue stream and deepen projected shortfalls. The Committee for a Responsible Budget estimated that a proposed tax cut could add about $2.3 trillion to Social Security's ten-year cash shortfall through 2035 and could accelerate trust fund insolvency by several years, jeopardizing retirees' benefits.
Read at 24/7 Wall St.
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