Trump Is Already Reneging On His ‘No Tax On Social Security’

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Trump Is Already Reneging On His ‘No Tax On Social Security’ Promise

WASHINGTON — Donald Trump is already reneging on one of the promises he repeatedly made to a key voting bloc to win back the presidency, his vow to eliminate taxes on millions of retirees’ Social Security payments.

“No tax on Social Security benefits for our seniors,” he told rallygoers in Prescott Valley, Arizona, on Oct. 13. “And you deserve it.”

“We will have no tax on tips, no tax on overtime, and no tax on Social Security benefits for our seniors,” he repeated at a rally in Greensboro, North Carolina, on Nov. 2.

After winning the November election and returning to the White House, he has continued with the same pledge. As recently as last week, during an interview with Fox News host Sean Hannity aboard Air Force One, Trump repeated it yet again: “No tax on Social Security benefits for seniors, which is so great.”

In reality, though, Trump and his congressional allies are offering Social Security recipients a mere fraction of the financial benefit they have been promising since last year. Instead of making Social Security benefits tax-free, House Republicans have now included in their spending and tax cut plan a new $4,000 tax deduction for seniors — which translates into an actual cash benefit of less than $500 for most retirees.

More well-off retirees, those getting larger Social Security payments because they had higher-income jobs during their working years, would have benefited the most from Trump’s promise — as much as $14,153 for those in the highest tax bracket and receiving $45,000 a year in Social Security payments. Even those with total incomes of $100,000, with $45,000 from Social Security and $55,000 from other retirement accounts, would have benefited $8,415 a year from “no taxes on Social Security.”

Under the current House plan, the benefits for these better-off retirees would be $1,480 and $880, respectively, while more moderate-income retirees would benefit $480.

The only retirees who could possibly benefit more from the new $4,000 tax deduction than they would have from Trump’s original promise are those who collect little or nothing from Social Security to begin with.

“It’s mostly a bait and switch,” said Jason Furman, a Harvard University economics professor and once a top economist in the Obama White House. “Most Social Security beneficiaries don’t pay any taxes on benefits already.”

Trump’s White House did not respond to multiple HuffPost queries on the matter.

Whether Trump understands or cares that the new $4,000 deduction is a pittance compared to what he had promised is unclear. He has over the years shown little interest in details of proposals that do not personally benefit him. During negotiations of the 2017 tax cut bill, for example, his principal interest in the sprawling legislation was to ensure that the lower corporate tax rate also applied to limited liability companies, such as the hundreds he uses to manage his various businesses.

Calculating taxes on Social Security benefits is complicated because of the rules designed by Congress and implemented by the IRS that levy taxes based on an individual’s total income, but which weigh wages and 401(k) withdrawals more heavily than income coming from Social Security checks.

For example, a retiree receiving $24,000 from Social Security payments and $30,000 from wages or retirement account withdrawals would wind up having $11,300 of the Social Security payments classified as taxable and end up with an adjusted gross income of $41,300.

Another retiree with the same total income ― $54,000 — but with $45,000 coming from Social Security and $9,000 from other sources would see just $3,250 of the Social Security payments classified as taxable and wind up with an adjusted gross income of $12,250 — a level that produces no income tax bill at all.

It is those people like the first example, who are receiving less in Social Security payments because they had lower-paying jobs in their prime working years, who would have been helped disproportionately more by Trump’s now-abandoned promise to eliminate taxes on Social Security payments entirely.

Meanwhile, the retiree making $54,000 with $45,000 coming from Social Security would not have benefited at all from Trump’s promise. The one making $54,000 but with only $24,000 coming from Social Security would have received a tax benefit of $1,356, according to a HuffPost analysis.

Under the new plan, that retiree will instead get a tax benefit of just $480.

“This is much less than” what Trump had originally promised, Furman said. “It was a stupid promise and policy, so frankly, I don’t mind.”