I’m a Retiree: 4 Reasons I Don’t Want Trump To Eliminate Income Taxes
Written by
Vance Cariaga
Edited by
T. Woods
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On the face of it, a proposal to get rid of income taxes sounds like the kind of political promise designed to win massive support from the voting public. Ex-President Donald Trump floated that idea in a recent meeting with Republican lawmakers, suggesting that federal income taxes could be eliminated altogether and replaced with an “all-tariff” policy designed to fund the government with high tariffs on imported goods.
The idea got a lot of media attention, but so far there hasn’t been much in the way of concrete policies from the Trump campaign team. The proposal’s feasibility is open for debate because of its potential impact on the economy and federal deficit — not to mention its likelihood of ever being approved by Congress. But it would likely be embraced with open arms by millions of cash-strapped taxpayers.
Trump also has suggested eliminating federal income taxes on Social Security benefits – an idea that at least has bipartisan support. In January 2024, U.S. Rep. Angie Craig, a Minnesota Democrat, introduced the “You Earned It, You Keep It Act,” which would eliminate all federal taxes on Social Security benefits beginning in 2025.
But there are problems with eliminating federal taxes on Social Security benefits, or getting rid of them on any type of income. While many Americans– including retirees — might see a short-term boost to their finances, the longer-term consequences could be dire.
Here are four reasons retirees and others might not want Trump to eliminate income taxes.
Social Security Could Be Threatened
Eliminating taxes on Social Security benefits — or doing away with them altogether – would put an already stressed program under even greater stress. Social Security’s Old Age and Survivors (OASI) Trust Fund is due to run out of money within the next decade, leaving the program solely dependent on payroll taxes for funding. Payroll taxes currently fund about 77% of benefits, but the Social Security Administration also gets funds from income taxes.
Exempting Social Security benefits from income tax would increase the U.S. budget deficit by about $1.6 trillion over 10 years, according to a blog from the Tax Foundation. It also would accelerate the insolvency of the Social Security and Medicare trust funds.
The Committee for a Responsible Federal Budget estimated that the move would push the insolvency date of Social Security’s retirement trust fund up by more than a year. When the fund becomes insolvent, some lawmakers have suggested cutting retirement benefits to deal with the shortfall.
Trump’s income tax idea might be one reason most Americans (and seniors) favor Vice President Kamala Harris over Trump when it comes to managing Social Security, according to a GOBankingRates survey of more than 1,000 U.S. adults. Here are some highlights:
- 46.81% of respondents said Harris’ policies would be better for Social Security.
- 35.06% said Trump’s policies would be better.
- More than half (nearly 51%) of respondents ages 55 to 64 said Harris’ policies would be better vs. 31% for Trump.
- Of respondents 65 and older, about 52% said Harris’ policies would be better vs. 33% for Trump.
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Not Everyone Would Benefit Equally
Chris Orestis, founder of Retirement Genius and an expert in retirement planning and financial health, told GOBankingRates in a recent interview that not everyone would benefit from Trump’s proposal to eliminate taxes on Social Security benefits.
“This would benefit only higher-income seniors, cost workers and the middle class higher taxes, and have no impact on lower-income seniors that need the relief the most,” Orestis said. “In the short term, this tax break penalizes workers not yet on the programs and does nothing for lower-income beneficiaries. In the long run, it hurts future beneficiaries of all stripes, but particularly lower income, as both Social Security and Medicare are undermined.”
More Americans Could Become Uninsured
If Trump were to eliminate income taxes, he would not only have to come up with alternative ways to fund the government — he’d also need to cut government spending to help make up the shortfall. One target for cuts could be the Affordable Care Act (ACA), aka Obamacare.
According to a recent analysis conducted by Capital & Main and Thomas Data Consulting, during the first three years of Donald Trump’s presidency the U.S. saw an increase of 2.3 million uninsured people. The primary reason was Trump’s “repeated undermining” of the ACA, which “made it harder for Americans to get health insurance,” according to Jeremy Lindenfeld, who wrote the Capital & Main report.
“Trump cut the enrollment period in half, canceled outreach programs, slashed the ACA’s $100 million advertising budget by 90%, and removed the penalty for not having insurance,” Lindenfeld said in comments shared with GOBankingRates.
Trump has since softened his stance on the ACA, saying his plan now is to make it “much better, stronger and far less expensive.”
An All-Tariff Policy Could Hurt the U.S. Economy
Trump’s idea to replace income taxes with an all-tariff policy has gotten considerable pushback from economists and financial analysts because of its potential impact on everything from trade and inflation to economic growth.
Analysts at Goldman Sachs said in a recent note that such a policy would shrink the economy, CNN reported. Another fear is that consumer prices will skyrocket again because Americans will have less access to cheaper imported goods.
“It’s one of those magical economic proposals that can actually cause inflation and put you into a recession – at the same time,” David Kelly, chief global strategist at JPMorgan Asset Management, told CNN, adding that tariffs are a “perfect stagflation machine.”
Editor’s note on election coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.
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