As Congress moves closer and closer towards finalizing the proposed tax reform, seniors need to keep a close eye on some of the legislation’s key provisions that could have a serious impact on their benefits and economic forecast. With a projected $5 trillion in cuts over the next decade, the final bill ratified by the House of Representatives and the Senate is likely to have long term consequences beyond the expiration of the tax cuts, including programs like Social Security and Medicare.
According to the National Council on Aging, the proposed reforms would add an estimated $2 trillion to the nation’s deficit, leading to cuts in Medicare, Medicaid, and the Older Americans Act. Additionally, the vast majority of tax cuts would go to large corporations and wealthy individuals, not middle-class and lower-income Americans most in need of a break.
While leaders in Congress claim the tax cuts will be offset by increased economic growth, many experts studying the bills take issue those assertions and instead warn such projections go against models predicted by reputable economists and financial experts. Just what the final tax cuts package reconciled between the House and Senate remains to be seen but many are not optimistic about what it could mean for millions of americans, particularly senior citizens and those about to retire.
The Congressional Budget Office (CBO) has already announced $25 billion will be cut from Medicare next year, as part of the mandated $136 billion in total cuts required under sequestration rules. Other programs subject to significant funding cuts include the Prevention and Public Health Fund and the Social Services Block Grant, which funds home care and adult protective services in many states.
Some key provisions of the House could have negative consequences for seniors include changes to deductions for medical bills, which 5 million people over the age of 65 use to deduct qualifying expenses above 10% of their adjusted gross income. Additionally, the Senate bill would eliminate the individual mandate for the Affordable Care Act (ACA), a move that would increase insurance premiums as much as $1,000 for some seniors.
The National Committee to Preserve Social Security and Medicare also believes sing a lower “chained” Consumer Price Index (CPI) could push lower earning Americans into a higher tax bracket. Such a move could increase tax brackets and the chances that Social Security cost of living adjustments will be cut the same way in the future.