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By Giulia Carbonaro
Senior Reporter
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Donald Trump's plan to remove taxes on Social Security benefits is likely to make the troubled program "even more insolvent," U.S. economy expert Veronique de Rugy has said.
Trump, the Republican presidential nominee, has pledged to cut taxes on Social Security income for the 67 million Americans who get the monthly checks as part of the retirement and disability program.
"Seniors should not pay taxes on Social Security, and they won't," Trump said during a campaign rally in Harrisburg, Pennsylvania, on July 31. The former president is seeking a second term in the White House against Vice President Kamala Harris, the Democratic presidential nominee.
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In an opinion piece published in The New York Sun on Thursday, de Rugy, a senior research fellow at the Mercatus Center at George Mason University, wrote: "Don't get me wrong, I love lower tax rates. I also believe the current tax structure on benefits creates a large incentive for seniors who may want to reenter the workforce to choose not to do so. And these types of work disincentives in the tax code are bad.
"While reducing Social Security taxes may encourage some seniors to go back to work, it will in turn cause more dramatic problems if not paired with reform to Social Security benefits, something neither Trump nor Ms. Harris cares to recognize."
Newsweek contacted de Rugy and the Trump campaign for comment by email outside normal working hours.
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Social Security income wasn't taxable until 1983, when then-President Ronald Reagan made the benefits taxable above a certain threshold. This threshold hasn't been adjusted for inflation in the years since, meaning that a lot more beneficiaries are now taxed on their Social Security income than they were more than 40 years ago.
According to data from the Government Accountability Office, about 40 percent of Social Security recipients pay federal income taxes on their benefits. These taxes bring in about $87 billion in revenue each year, de Rugy wrote, in addition to payroll tax revenue. She added, "Even still, Social Security is insolvent."
De Rugy believes Congress "should have reformed the program more fundamentally" in 1983. "The way the program was initially designed baked in eventual insolvency. Yet Congress took a more politically convenient, less responsible route. Today, we are paying the price for this political cowardice," she wrote.
Experts have warned that major shortfalls in the program may lead to the Social Security program going insolvent in the coming years, with its main trust fund expected to dry out by 2033. Should that happen, millions of beneficiaries would see their income abruptly cut by 23 percent.
In this context, eliminating taxes on Social Security income would be "unfair" as well as unproductive, de Rugy said, adding, "Contrary to common belief, seniors are overrepresented in the top income quintile."
She continued: "Comparatively, younger people currently paying for seniors' benefits are more likely to be in the bottom of the income distribution. In this way, Social Security redistributes benefits to higher- from lower-income Americans. Lifting taxes would make this inequality even worse."
De Rugy compared cutting taxes on relatively well-to-do seniors to "a slap in the face for younger and poorer current working Americans."
She added: "The bottom line is that exempting Social Security benefits from taxation is a bad idea. So why propose it? Because politicians get rewarded when they promise to enrich voters, including showering them with cash."
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