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How midterms could reshape tax policy
CNBC • • business
Key Points:
- Congress has six years to reform Social Security to avoid benefit cuts, with the trust fund projected to be depleted by 2032, potentially allowing payment of only 78% of benefits.
- Democratic candidates generally support raising or eliminating the payroll tax cap on high earners to increase program revenue, while some Republicans favor extending a temporary senior tax deduction that reduces tax revenue.
- Raising the payroll tax cap could significantly improve Social Security's long-term finances but may face political resistance and could impact the labor market due to higher marginal tax rates.
- The senior tax deduction, enacted in 2025 and set to expire in 2028, offers up to $6,000 in deductions for seniors, reducing taxable income but also accelerating the depletion of Social Security funds.
- Experts warn that while the senior deduction benefits many retirees in the short term, it does not address the program's solvency issues and may make Social Security's financial outlook more fragile.
