The Grassroots Corner October 21st, 2024

TRUMP’S PLAN TO UNTAX SOCIAL SECURITY

           Although Presidential candidate Donald Trump attacked his primary opponents for supporting the FAIRtax, it looks like Trump himself may actually be a FAIRtax fan at heart. First, he proposed that tips be exempted from the income tax—a position his opponent, Kamala Harris, recently pilfered. Next, he proposed replacing income taxes with tariffs. See our recent Grassroots Corners for details.

            Now, Mr. Trump wants to exempt Social Security benefits from the income tax. Let’s see how that idea would work. Gabriella Cruz-Martinez[1], writing last August for Kiplinger, a publisher of business forecasts and personal financial advice, notes that 67 million US households receive monthly benefit payments from the Social Security retirement and disability programs. You can read her article here. https://www.kiplinger.com/taxes/whats-wrong-with-trumps-pledge-to-repeal-taxes-on-social-security-benefits.

           Currently, up to 85% of Social Security benefits can be subject to federal tax, depending on a taxpayer’s “combined income.” The IRS has a calculator on its website to determine how much of your Social Security benefit is taxable. Here is the link: https://www.irs.gov/help/ita/are-my-social-security-or-railroad-retirement-tier-i-benefits-taxable. A rough idea would be to calculate your adjusted gross income plus non-taxable interest and half your Social Security benefit. Let’s call the result your “Social Security income.” If you are married and filing jointly, you pay no tax on your Social Security benefit if your Social Security income is $32,000 or less.

           Half your Social Security benefit can be taxable if your Social Security income is between $32,000 and $44,000. If your Social Security income is over $44,000, 85% of your Social Security benefit can be taxable. Again, these are just examples.  Your actual case may differ. Remember also that you paid income tax on your Social Security contributions during your working years, so the tax man gets you coming and going.

           Ms. Cruz-Martinez stresses that lower-income households would get little to no benefit from Trump’s proposed tax cuts on Social Security benefits. Households earning between $32,000 and $60,000 annually would get an average tax cut of about $90. Only those in the top 0.1%, making $5 million or more annually, would see significant tax savings. They could get a tax cut of nearly $2,500 per year.

           We have a better idea. With the FAIRtax, not only would your Social Security income be totally tax free, there would be no federal tax on any income from any source.  You would never have to file a federal income tax return again.  Even if low-income taxpayers benefit less, less is more for those who do not have much.

           Cruz-Martinez also writes that taxes on Social Security benefits should raise about $94 billion this year. Congressional Budget Office (CBO) data shows the total revenue would be $1.6 trillion between fiscal years 2026 and 2035. Cutting off this source of revenue would mean that Congress would have to come up with funds from somewhere else.

           We have a great idea of where that “somewhere else” might be. “Somewhere else” is the FAIRtax!   Consider that illegal income tax evasion currently stands at around $1 trillion a year.  Further consider that there have been studies done that indicate that the FAIRtax would eliminate close to 95% of this evasion.  That’s an additional $950 billion dollars a year that the FAIRtax would bring in that the income tax fails to collect.  That’s ten times the revenue that taxes on Social Security benefits generate.

           With the FAIRtax, Social Security and Medicare funding jumps to a larger, more stable, and growing funding source: consumption. If Mr. Trump truly wants to untax seniors and stabilize Social Security, he needs to look no further than the FAIRtax.

           Do we see a trend here? Mr. Trump wants to eliminate income tax on tips and Social Security benefits and replace income taxes with tariffs. Mr. Trump, you might as well go for the gold – go for the FAIRtax!

           I would love to hear your ideas on how to get the FAIRtax idea to Mr. Trump and Ms. Harris now that vote-by-mail ballots are pouring in and early voting is about to start.
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🇺🇸   Call For Pictures & WriteUps - We need more of you to send in pictures and news. If you have something to share, please send your material to me, Jim.Bennett@FAIRtax.org, (908) 578-4975, or fax (908) 598-2888. When others see your activity, they are inspired, and the process snowballs. When the process snowballs, Congress Members, Senators, and even the President start to listen.