Social Security is now taxed at 6.8% (or $1,250 annually), with the top tax rate increasing to 8.2% (the lowest rate is 3.4%).
The Social Security Trustees Association estimates the tax would increase by more than $100 billion in 2021 if the rate remains at 6%.
To avoid this tax, the plan would need to eliminate two additional tax brackets for Social Security recipients, as well as eliminate some tax breaks for higher income recipients.
The new tax rate would be levied on earnings over $1 million annually, as opposed to over $3 million annually for other taxpayers.
The Social Security Administration, the government agency charged with administering Social Security, would also be able to increase its revenue by reducing its payroll tax rate to 5% instead of 6%.
The agency could also cut payroll taxes by $20 billion.
The plan also would allow the Social Security trustees to eliminate the deduction for the value of a home.
The tax plan would also raise the threshold for Medicare’s cost-of-living adjustment (COLA) for workers to about $250,000 a year.
This would increase the cost of Social Security payments for many workers, but it would also eliminate the cost-sharing subsidy for workers who earn up to $250.000 a season and $2,000 for people earning $200,000 or more a year, according to the Tax Policy Center.
The Trump administration has been working on a plan to increase the maximum income tax bracket for low- and middle-income earners and has said it will consider raising the income tax threshold for higher-income taxpayers as well.