Content starts here
CLOSE ×
Search
Reply
Newbie

Federal taxes on Social Security

Is anyone working on getting Congress to raise the $25000 income threshold on taxing SS? If it had kept up with inflation, it would be over $50,000 today and not affect more than 50% of SS recipients.

1
Kudos
11256
Views
0
Replies
0 Kudos
3,040 Views
5
Report
Bronze Conversationalist

@kaylewis49 I agree with GaiL1's comment that the SS program needs the money. So, the chances of amending taxation of  SS benefits are probably not going to be a front  burner issue for Congress. Plan accordingly.  Please note that the $25,000 threshold which was enacted in 1983 has been in place for about 36 years. If indexed to inflation, that threshold would be in the $50,000 range using 2% as an inflation rate. If using 3%, that threshold would be closer to $70,000. It gets progressively worst using inflation factors greater than 3%.

0 Kudos
2,852 Views
0
Report
Honored Social Butterfly

Haven't officially heard anything but I extremely doubt it will happen because the Social Security Trust Fund needs this money - that's where it goes; not to the General fund.  

 

President Reagan created the tax in 1983 but only on 50% of it.  Think of this as the 50% that your employer contributed which wasn't taxed while you were working and contributing (employee & employer).  That was the Social Security Amendment of 1983 which saved the financial woes of the Trust Fund it was going through back then.

 

A provision of the 1993 Omnibus Budget Reconciliation Act raised the Social Security tax rate from 50% to 85% for households in a higher income bracket. The act was Democratic President Bill Clinton's first budget and marked the highest peace-time tax increases on high-income earners in U.S. history up to that time, according to the University of California, Berkeley.  

 

Biden, a Congressman at the time, voted to pass the 1983 amendments, according to records maintained by the SSA. GovTrack, a government transparency website, recorded Biden's yea vote on the 1993 Act.

 

USAToday Fact Checker:  10/16/2020 - Fact check: Biden voted to tax Social Security, wants to reform...

 

They didn't tie the figure to inflation - purposely because as time went by, it covered more and more people and thus the revenues from it gets bigger and bigger.

3,018 Views
3
Report
Regular Contributor

Social Security is such a partisan issue, both Republicans and Democrats have their proposed solutions in the past; but, they are both very different approaches.  However, there was legislation proposed in a previous congress called The Social Security Act 2100 sponsored by a Democrat, John Larson, who suggested raising the threshold to $50,000 for single and $100,000 for married.indexed to inflation.  Joe Biden proposal to tax individuals whose income is $400,000 or greater comes from that legislation.  That very same legislation calls for a gradual increase in payroll taxes from the current 6.2% to 7.4% for both the employer and employee.  The Republicans proposed legislation call the Social Security Act of 2016, that included raising the retirement age to 70.  Wouldn't you think Democrats and Republicans could find a compromise between the two proposals.  NOPE!  

2,662 Views
1
Report
Honored Social Butterfly

John Larson's Social Security Act 2100 is a good piece of legislation as far as fixing financially the overall system for the long term (they use 75 years as a marker).  

There are a bunch of them but some focus only on some minor aspect of the system rather than increasing income or modifying benefits.

Social Security - Office of the Chief Actuary's Estimates of Proposals to Change the Social Security... 

 

Yes, I agree with you there is a lot of room for compromise.  But we just keep waiting and waiting . . . . . . . . . . 

For the last (10) years the annual actuary report on the Trust Funds have ended in the same wording regardless of what party had control.

Conclusion (2020 report)

Lawmakers have many policy options that would reduce or eliminate the long-term financing shortfalls in Social Security and Medicare. Lawmakers should address these financial challenges as soon as possible. Taking action sooner rather than later will permit consideration of a broader range of solutions and provide more time to phase in changes so that the public has adequate time to prepare.  

 

Conclusion (2010 Report)

. . . . the significant longer term financial imbalances of the programs still need to be addressed. The sooner action is taken to address the long-run financial imbalances, the more reform options will be available, and the more time there will be to phase in changes so that those affected will have adequate time to prepare.

 

THAT TIME IS RUNNING OUT !

 

 

2,629 Views
0
Report
Bronze Conversationalist

@GailL1 Once again, you have provided pertinent information regarding the subject. The 85% threshold that was enacted in 1993 is brutal. The thresholds for single/married or $34,000/$44,000 are met by more and more folks year after year. It has been 27 years and at a 3% inflation rate, those thresholds should be approximately $75,000/ $97,700. I rounded fractions to get to whole numbers. It is sad that Congress has placed such a burden on the backs of the SS beneficiaries. So, I will try to provide a numerical example for all readers to illustrate, in dollars, the impact. A person or married couple that exceed the 85% thresholds ($34,000/$44,000) and receive $18,000/year in SS benefits would pay about $1,836 more in Federal Income Tax (FIT) if in the 12% tax bracket ($18,000 X .85 X.12) or $3,366 more FIT if in the 22% tax bracket ($18,000 x .85 X  .22). To be fair to the folks in Congress, I found an article from the NY Times that communicates an effort to reduce the 85% taxation. At that time, President Clinton advised that he would veto such legislation. Hopefully,  I copied it correctly. https://www.nytimes.com/2000/07/28/us/house-passes-bill-to-reduce-benefits-tax-passed-in-93.html

0 Kudos
2,847 Views
0
Report
cancel
Showing results forย 
Showย ย onlyย  | Search instead forย 
Did you mean:ย 
Users
Need to Know

"I downloaded AARP Perks to assist in staying connected and never missing out on a discount!" -LeeshaD341679

AARP Perks

More From AARP