At this point, pretty much everyone is keeping an eye on the will he/won’t he debate over President Donald Trump’s tax cuts. Especially when it comes to Social Security, people from all walks of life are concerned over whether benefits will be cut and whether the income gap will grow.
Learn More: Trump Wants To Eliminate Social Security Taxes: Here’s How Much the Average Retiree Would Save
For You: How Far $750K Plus Social Security Goes in Retirement in Every US Region
Why should you care about the impact of potential Social Security tax cuts on the wealthy? After all, there are only 902 billionaires in the United States and only 24.5 million millionaires, in a country with more than 340 million people.
For many, it’s an issue of fairness. Americans want to know whether the rich are going to get richer while the middle class disappears.
To get answers, GOBankingRates turned to three finance experts. Here are their predictions for how Trump’s proposed Social Security tax cuts could impact the rich.
Maria Rosey, certified financial analyst and the founder of One Touch Finance, said, “Social Security has not experienced such a fundamental funding mechanism change since it started operating, according to economic policy analysts, who predict high earners will obtain substantial tax savings of more than $100,000 per year.”
Currently, the payroll tax rate for Social Security is 12.4% — 6.2% paid by the employee and 6.2% paid by the employer. If Trump’s proposal to remove this payroll tax were implemented, other sources of income would be required to keep Social Security funded and benefits available.
So, funding for Social Security will go away, much of that funding would likely remain in the pockets of the wealthy, and a new funding source has not yet been clearly identified — Trump has proposed tariffs as a replacement for income taxes to fund the government, but it is unclear whether that would apply to Social Security funding or to fund other government spending.
Read Next: Trump Wants To Replace Income Taxes With Tariffs: 2 Impacts on the Middle Class
Rosey also pointed out the existing income cap for Social Security taxes: For 2025, that cap is $176,100, meaning earnings over that amount are not subject to Social Security taxes.
“The Social Security tax provides retrogressive benefits because the tax ceases to collect income beyond specified income limits, compared to progressive income taxes,” Rosey explained. People who earn $1 million in a year pay the same taxes toward Social Security as those who make $176,100.
This limits the tax savings the wealthy would see if Social Security taxes were eliminated, but only because they already pay less proportionally.
Harpreet Saini is the CEO at We Buy Houses in Metro Detroit and a 10-year veteran of analyzing tax policies for financial planning. He took these predictions even further, noting the exact dollar amounts the wealthy would likely save under Social Security tax cuts.
“We’ll see an estimated $50,000 plus per year in savings for individuals who make more than $1 million,” he said. “That’s a 6.2% increase in take-home pay for the affluent, potentially shortening the Social Security trust fund by $1.4 trillion over the next decade.”
He calculated that his high-net-worth customers would save $6,200 for every $100,000 they earn over the Social Security tax income cap. “It is a snowball effect when the $1 million individual saves more than $50,000 in taxes, and the $50,000 median individual derives no benefit.”
If the uneven Social Security tax burden remains in place — or is increased — it will continue to contribute to the income gap. This means the rich get richer, and more people in the middle class are likely to drop into the working class. That also means more people from the working class could drop into abject poverty.
Gary Jain, data analyst and founder and CEO of Ledger Labs, Inc., said, “If Trump pushes for Social Security tax cuts, especially those that benefit high earners, it could significantly widen the income gap in the U.S.”
He pointed out that with less funding available, future benefits could be cut, or the financial burden could shift to middle- and lower-income earners to support retirees and people relying on disability benefits.
“While high-income individuals may invest their tax savings and grow their wealth, the average American may end up facing reduced benefits or higher taxes to keep the system afloat,” he explained. “In short, these tax cuts may offer short-term gains for the wealthy but could carry long-term risks for the broader retirement safety net.”
Editor’s note on political 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.
More From GoBankingRates
This article originally appeared on GOBankingRates.com: I’m a Finance Expert: Here Are 2 Ways Trump’s Social Security Tax Cuts Could Impact the Rich
发表回复