Tax legislation approved by Congress and signed into law by President Trump on December 22, 2017 (P.L. 115-97) will inevitably lead to the unraveling of working and middle-class programs to pay for massive tax cuts for the very wealthy and profitable corporations. The following is a summary of how the new law will undermine the retirement and health security commitments made to generations of Americans.
Exploding the Budget Deficit Will Lead to Middle-Class Benefit Cuts
The tax law would leave Medicare, Medicaid and Social Security vulnerable to benefit cuts because of its dramatic $2.3 trillion increase at a minimum in the public debt – an increase that will have to be offset in the future. Inevitably, current and future generations of older Americans and people with disabilities will be forced to pay a heavy price for this irresponsible law. Key supporters of the tax bill made clear their intent immediately after its approval. Senator Marco Rubio (R-FL) said that the tax bill is just the first step before “…instituting structural changes to Social Security and Medicare…” benefits to reduce the federal deficit.
On March 11, 2019, President Trump submitted his Fiscal Year (FY) 2020 budget recommendations to Congress. This budget would drastically cut programs that benefit America’s oldest — including many vulnerable — citizens. The president’s spending plan calls for deep reductions to Social Security Disability Insurance, breaking his promise not to touch Social Security. It also includes $846 billion in cuts to Medicare, another program he promised not to touch. In other words, it is clear President Trump and the majority leadership in the Senate will seek cuts to Medicare, Medicaid and Social Security benefits to pay for the deficits this tax law creates.
- Medicare beneficiaries cannot afford to pay more for less coverage – particularly when half of them have incomes of less than $26,200 a year and spend 41 percent of their Social Security check to pay for Medicare Parts B and D out-of-pocket costs for premiums and cost-sharing amounts.
- Regarding Medicaid, middle-class Americans often rely on the program for long-term services and supports when they exhaust their savings. Nearly two-thirds of all nursing home residents’ care is financed in whole or in part by Medicaid. In addition, Medicaid provides home and community-based services that allow seniors to stay in their homes. The fiscal crisis created by the tax bill is likely to result in a trillion-dollar cut to Medicaid that will limit seniors’ access to long-term care services.
Chained CPI Hikes Taxes and Makes Social Security Vulnerable to COLA Cuts
P.L. 115-97 will require the use of the slower growth “chained” Consumer Price Index (CPI) to calculate increases in tax brackets and the standard deduction. Replacing the current Consumer Price Index (CPI-U) with the chained CPI will result in higher taxes for all Americans, including seniors.
More significantly for seniors, now that the law requires the chained CPI to be used to index increases in tax brackets and deductions, supporters of cutting Social Security are likely use this precedent to demand that the chained CPI be also used to determine Social Security and Military and Federal Civilian Retirement cost-of-living adjustments (COLA). As a result, the COLAs of current and future beneficiaries would be cut.
- According to the Chief Actuary of the Social Security Administration, three years after becoming law, calculating the COLA based on the chained CPI would decrease Social Security benefits by about $130 per year (0.9 percent) for a typical 65-year-old. By the time that senior reaches 95, the annual benefit cut would be almost $1,400, a 9.2 percent reduction from currently scheduled benefits.
NATIONAL COMMITTEE POSITION
The National Committee will strongly oppose any effort to cut Medicare, Medicaid and Social Security benefits, especially to pay for the heinous $2.3 trillion cost of the new tax law.
New CBO estimate of impact of tax cut on deficit