Former President Trump has called for seniors to be exempt from paying taxes on Social Security benefits.
“Seniors should not pay tax on Social Security,” Trump said in a July 31 post on Truth Social. He didn’t elaborate on how such a move would be paid for or if it would be part of broader Social Security reform.
Trump’s comments come as Social Security faces a perilous financial situation, with the Congressional Budget Office estimating the program’s retirement trust fund will become insolvent by 2033 and see payments drop 23 percent.
The Committee for a Responsible Federal Budget conducted an analysis of Trump’s proposal and found it would increase the federal deficit by $1.6 trillion to $1.8 trillion through 2035 and push up the date of the Social Security Trust Fund’s insolvency to 2032.
Senate Finance Committee member Thom Tillis, R-N.C., provided cautious support for Trump’s proposal, but still pointed out the impending fiscal crisis facing Social Security.
“All of these things make a lot of sense, but we also have to keep in mind that Social Security right now is headed towards insolvency,” Tillis told reporters July 31. “These things have to work in the context of how they pay for themselves.”
Senate Finance Committee member Sherrod Brown, D-Ohio, dismissed the idea and pointed to his own legislation on Social Security reform.
“The best answer is working on our Social Security Fairness Act,” Brown said.
The bill, which Brown introduced last year, would repeal provisions that reduce Social Security benefits for certain individuals, including those who receive a private pension.
Currently, seniors who make more than $25,000 per year are subject to taxes on their Social Security income, with those earning more than $34,000 paying taxes on up to 85 percent of their Social Security income.
Recent Precedent
The Tax Court on May 8 considered a case in which the petitioners Robert and Patricia Thul of Montana, representing themselves, argued that Social Security benefits aren't taxable income. Robert Thul said the benefits were “more along the lines of a tax refund.”
Judge Emin Toro said, “I imagine . . . you’ve read what Congress said in the Internal Revenue Code about Social Security benefits. I’m thinking about section 86.”
Section 86, except as provided in paragraph 2, calls for a portion of Social Security benefits to be included in gross income. The judge explained the law to Thul and the determination made by Congress.
“Sometimes they’re taxable, and sometimes they’re not depending on what the taxpayer’s other circumstances are. But Congress has told us that this is income,” Toro said. “What is the basis for your claim that it should not be?”
Thul replied, “I was thinking along the lines that Congress has made mistakes before, like take Prohibition for instance, and that was overturned. . . . I’m just pointing that out that this is one of those things that I feel is wrong.”
Toro also pointed to Roberts v. Commissioner, a 1998 nonprecedential decision from the Ninth Circuit that addressed the matter.
“You might be right, you might be wrong, about whether they were right to tax Social Security benefits, but it would seem to me, without prejudging your case, that it would be up to Congress to change the rule,” Toro said.
Cady Stanton contributed to this article.