No joke: Donald Trump has already proposed a strategy generating income tax to save social security

Social security is undoubtedly the most important social program of our country. In addition to protecting some 175 million American workers in the event of long-term disability and / or premature death (nearly 6 million people receive a survivor benefit each month), it is responsible for maintaining about 15.3 million retirees above the federal poverty line. More than three in five of these older beneficiaries currently rely on the program to provide at least half of their monthly income.

Social security faces its biggest challenge for eight decades

But social security is also a program that faces a steep climb in the coming decades, as announced by the latest annual report of the board of directors.

Source of the image: Getty Images.

The report contains a prediction that Social Security will spend more than it collected this year for the first time since 1982. With the exception of a stay of execution in 2019, this net cash outflow should really start to increase in 2020 and beyond. After about 16 years of exits, the $ 2.89 billion of surplus social security money is expected to disappear.

The good thing about older people, if any, is that social security does not run the risk of going bankrupt and disappearing, even if the surplus funds in the program could soon disappear. Thanks to its two sources of recurring income – its 12.4% wage tax on earnings earned up to $ 128,400 (as of 2018) and its taxation of benefits – Social Security will still collect many receipts that can be paid to eligible beneficiaries.

The disadvantage of the trustees' perspective is that it clearly shows the unsustainability of the current payment schedule. If Congress does not raise additional funds, current and future beneficiaries could face a widespread reduction in benefits ranging up to 21% by 2034. This is a deplorable forecast given the the well-known dependence of the elderly on social security.

President Trump's social security strategy has changed dramatically in the last 18 years

However, President Trump believes he has the ideal solution for social security. Rather than making direct changes to the program, he believes the best course of action is to boost economic growth. By enacting and legalizing the Employment Tax Reduction and Employment Tax Reduction Act, thereby lowering corporate income tax rates and individual taxpayer liability, Trump aims to increase overall employment and wages. This should lead to increased recovery of social charges and at least improve the short-term health of social security.

Source of Image: US Department of Homeland Security via Flickr.

But what you may not realize is that Trump's solution to solving social security problems has evolved significantly over time. In 2000, when his book, The America we deserve , was published for the first time, it offered a distinctly different way to repay the public debt and, subsequently, to fill the long-term cash deficit of the Social Security.

Often presented as a president who is fighting for the 1%, Trump suggested the idea of ​​introducing in his book a single tax of 14.25%. In 2000, this tax would have generated about $ 5,700 billion, which would have allowed the country's national debt to be fully repaid. In turn, this would have saved 200 billion dollars a year in interest payments. Trump has suggested that $ 100 billion in savings be earmarked for middle class families for a decade, with the remaining $ 100 billion going to the Social Security Fund, guaranteeing its long-term solvency. .

Here is the extract from The America we deserve :

I would impose a Once , 14.25% tax on individuals and trusts with a net worth of more than $ 10 million. That would generate $ 5,700 billion in new revenue, which we would use to pay back the entire national debt. We would save $ 200 billion in interest payments, which would allow us to cut $ 100 billion a year, or $ 1 trillion over ten years, the taxes of working families of the middle class. We could use the rest of the savings – $ 100 billion – to strengthen the Social Security Trust Fund. In 2030, we [will have] put $ 3 trillion in the trust fund, which would make it solvent for the next century.

Source of the image: Getty Images.

Social security needs a direct and bipartite solution

Of course, a single tax of 14.25% on people with more than $ 10 million in wealth today would probably not be close to paying back our national debt, which stands at over 21%. billions of dollars, nor to strengthen social security in the long run. Nor is it an idea that Trump would likely support, especially after a major tax cut for all income groups in December 2017.

If social security needs to be corrected, the solution will almost certainly have to be direct (ie an amendment to the existing law) and, for the reasons mentioned above, it will be necessary to propose basic solutions of both parties. policies. . This means adding new income by forcing the rich to pay more into the system, as well as reducing lifetime benefits through a gradual increase in the retirement age for future generations of retired workers . This solution, rather than a single tax, should provide a solid financial base for social security.

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