Promise to Eliminate Income Tax on Social Security

[d196684e]

I'm reaching out to encourage everyone to contact their representatives and support President Trump's proposal to eliminate income taxes on Social Security benefits.

Here's why this matters:
Key Points to Consider
Currently, up to 85% of Social Security benefits can be subject to federal income tax1
About 67 million U.S. households receive monthly Social Security benefit checks3
The proposal would primarily help middle-income seniors who currently pay taxes on their benefits
Action Steps
Contact your local congressional representatives
Emphasize support for Trump's plan to remove Social Security benefit taxation
Highlight how this would provide financial relief for seniors
Important Caution
While the proposal sounds appealing, financial experts warn it could potentially harm the long-term sustainability of Social Security. The Congressional Budget Office estimates this tax cut could reduce Social Security revenue by approximately $950 billion between 2026-20353.
Recommended Communication Points
Express support for tax relief for seniors
Request careful consideration of long-term program funding
Ask for transparent analysis of the proposal's financial impact
Let's work together to ensure our voices are heard and our financial security is protected!

[GailL1]

@d196684e 

You will be happy to know that (2) RepublicanSenators introduced SB 358 last week that changes the limits for taxes on Social Security Benefits.

https://www.marshall.senate.gov/newsroom/press-releases/senators-marshall-blackburn-introduce-bill-t... 

[WebWiseWoman]

Neil deGrasse Tyson said it best “How sad it must be — believing that scientists, scholars, historians, economists, and journalists have devoted their entire lives to deceive you, while a reality tv star with decades of fraud and exhaustively documented lying is your only beacon of truth and honesty.”

[GailL1]

@d196684e 

Would eliminating this tax on benefits be ok with you IF we reduced the benefits that everybody is receiving to make up for this loss in income to the Trust Fund - that is exactly what will happen come around 2030 or so.  OR maybe that reduction in the benefit amount would be built into the Elimination of the Tax on Benefits legislation. 

By all means let’s get rid of the tax on benefits - we would just be losing even MORE money in the Trust Fund causing the time of insolvency to even come much earlier- maybe it will be a 25% reduction instead of closer to 20% - but we can plan ahead - RIGHT?

In 2023, taxes on benefits added $ 50.7 BILLION to the Social Security Trust Fund.  The reason that this was added was to help out with the Trust Fund since we are no  longer taking in enough in FICA taxes to cover benefits thus since 2021 we have been having to pull more and more money out of the Trust Fund reserve to pay benefits.  The number of workers paying into the system has been greatly reduced with the advent of technology.  

SSA.gov- Trust Fund DATA 

See table 2 - Old-Age, Survivors, and Disability Insurance Trust Funds Income

Would you also support increasing the contribution rate for everybody who is working?  The younger generations might think you are only looking out of yourself.

You could just think of these taxes as paying for a benefit you got while working - mainly the matched contributions paid by your employer for you.

If you say, just remove the tax max cap - I will scream because just doing this isn’t solving the insolvency problem because the tax max cap relates directly to capping the maximum benefit.

SSA.gov- Contribution and Benefit Base 

Congress  just repealed the Windfall Elimination and Government Pension Offset - Per the CBO this adjustment in benefits for those involved will COST the Trust Fund  $200 BILLION over 10 years - now you want to even do more harm to the Trust Fund by elimination this tax on benefits.

I think I also read that more beneficiary’s DON’T pay taxes on their benefits than those that DO - so I don’t think those that DON’T pay taxes on their benefits will be supportive of pulling an income source from the Trust Fund.

Keep working on reducing the income going into the Trust Fund and we will all have to be tightening our belts.  

[HaroldB930596]

 I don't think this is correct. Income taxes go into the general revenues of the US Treasury, not into any of the SS Trust Funds which are supported by exclusively payroll taxes.  

In any case, I think there is zero chance that SS benefits will be made tax-exempt even in the unlikely event that Trump pursues the issue.

[GailL1]

@HaroldB930596 

Taxes on Social Security Benefits are NOT Income taxes.

 It is true that they are figured at the same time that one figures their income taxes but the calculation is separate. They are figured based on the 1099SSA that the SSA sends out on the benefits one receives and then is shown on the 1040 Form on line 6b.  IRS.gov - Form 1040 

 The same way some other taxes are done if they are designated to another type of tax.  Like a self-employed persons computation of their SS and Medicare tax - they figure their self-employment tax at the same time they do their income tax but it reported separately - IRS.gov - Schedule SE 

The IRS when they process the income tax form credit these amounts to the proper place and in these cases it is to the Social Security Trust Fund - one as taxes on benefits and the other as SE taxes.

[sgm55]

Please post a link to the source of your claim, pertaining to how the income tax we currently are forced to pay on our social security income, that we've earned, will, if that payment is done away with, shrink the fund. 

I submit that we do away with that forced payment, which is an insult to those of us who worked hard all of our lives, AND had the good sense to invest and save so that we have a good income from our investments, to this day.  I strongly suggest that we do away with that tax on our senior incomes, AND do away with the BILLIONS OF DOLLARS we currently dole out to countries that we have no business supporting, monetarily. That saved money will be more than enough to keep the SSA sitting pretty in the years to come. 

[BalbonisMoleskine]

From https://www.aarp.org/retirement/social-security/info-2023/social-security-taxes.html: "By law, federal income taxes collected on benefits go into the government’s Social Security and Medicare trust funds, meaning they contribute to future benefit payments. Income taxes on benefits paid out in 2022 added $48.6 billion to Social Security’s coffers, accounting for about 4 percent of the program’s revenue, the vast majority of which comes from payroll taxes levied separately on most U.S. workers’ earnings."

[Tonster521]

@sgm55 As you may not know, only about 45% of SS Beneficiaries pay Federal Income Taxes (FIT) on their SS Benefits. The other 55% do not exceed the income thresholds established by Congress in 1983 (effective starting 1984).  In fact, some do not pay any FIT because they do not exceed the Standard Deduction.

As Gail1 pointed out, FIT obtained by these FIT provisions are returned to the SS Trusts (i.e., OASDI - up to 50% threshold and Medicare Hospital Insurance - from 51% to 85% threshold). Although the SSA does not acknowledge "means testing", this appears to me to be a form of "means testing". This provision has nothing to do with the Government's General Fund wherein the Government may pay other countries for known and unknown reasons. 

It should be noted that this FIT provision and other solutions were recommended by the National Commission on Social Security Reform (aka Greenspan Commission) in January 1983. The National Commission which was a Bipartisan Committee was created in December 1981 to prevent the depletion of the SS Trust estimated to reach zero ($0.00) in August 1983 and possibly the end of the SS Program. The National Commission's recommendations became the basis for the SS Amendments in 1983. The National Commission's recommendations (approx. 22) were estimated to cover about 66.7% of the 75 year SS funding plan.The remaining 33.3% was left for further evaluation with suggestions for more SS Benefit cuts and/or increases in FICA tax rates (about .5% to both employee and employer starting in 2010). I am providing a link to the history that you need to review https://www.ssa.gov/history/reports/gspan.html Congress has failed by not doing anything since 2010. Moreover, Congress has recently repealed the WEP and GPO providing bonuses to certain government pensioners. Congress did not offer any solution for paying these bonuses which will exceed $200 Billion. Congress' repeal is costing the SS Program and, more importantly, over 50 million SS Beneficiaries a loss of SS Benefits since the SS Trust is estimated to deplete in 2033 instead of 2034. So, repealing FIT on SS Benefits which is about $51 Billion per year will deplete the SS Trust sooner, perhaps somewhere between 2030 and 2033.    

[GailL1]

@Tonster521 wrote:  Congress has recently repealed the WEP and GPO providing bonuses to certain government pensioners. Congress did not offer any solution for paying these bonuses which will exceed $200 Billion. Congress' repeal is costing the SS Program and, more importantly, over 50 million SS Beneficiaries a loss of SS Benefits since the SS Trust is estimated to deplete in 2033 instead of 2034

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I have discovered that this cost to the system of $ 200 billion maybe vastly UNDER estimated by the CBO because those widow/widowers who knew they were not gonna get ANY Social Security Survivors or Spousal Benefits because their pension was too high - did not file and thus havn’t been counted in the estimate from the CBO.

Since the GPO was fully repealed, they can now file and get their Survivors benefits or their Spousal benefits without any reduction.  

They are happy as larks !!!!!

[Tonster521]

@GailL1 And they did not have to pay any additional FICA taxes. This is an insult to the Survivors and Spouses who along with their Worker Spouses (husbands and/or wives) both paid FICA taxes. Moreover, the dual worker SS covered employment cannot receive both a Worker SS Benefit in addition to a Survivor and/or Spousal Benefit. As you know, their SS Survivor/Spousal Benefits are reduced or offset by 100%.by their SS Worker Benefits. However, certain government pensioners will not get reduced or offset one penny. In fact, they will get paid twice which is a bonus. The SSA will reduce the SS Trust to pay these bonuses.As you know, current FICA taxes do not even cover the current SS Benefit payroll. Congress did not listen to testimony from experts advising to review the benefit formulas not repeal them.I agree with your analysis that there are many more Survivors and Spouses that did not apply because they knew the rules. 

[GailL1]

@Tonster521 - you are right - what were they thinking?  

There were even other proposals to fix the formula reviewed at the same time as the Social Security Fairness Act -they rejected it.

SSA.gov - Equal Treatment of Public Servants Act of 2023  

They fought this out and dusted it off, and it did the rounds of being discussed in the House in Nob. 2024 - but then decided t just to go ahead and give the benefits going back to 01/2024.

The one teacher that I am working with, already gets a pension of over $ 5500 a month and now she will get her late husband’s Survivors Benefits - even though she has since remarried - but she married AFTER she was over 60 - so she still gets her former husbands Survivors benefits.  

GPO is different than WEP but the newly passed legislation didn’t create any difference in them - they were both REPEALED. - we can only hope that as the rules and processes are written that some smart person working on this aspect of the legislation will say, Whoa - somebody is really getting a bonus.

And if we now repeal the taxation on benefits - something is gonna have to give - We may see the letter addressed to all of the Social Security Beneficiaries saying - We regret to inform you of a serious shortfall, please tighten your belt.

[Tonster521]

@GailL1 I read this article from Romina Boccia, Director of Budget and Entitlement Policy at the Cato Institute regarding the SS Fairness  Act. I thought Romina provides the answer to your question.https://www.cato.org/blog/what-social-security-fairness-act-tells-us-about-likely-future-social-secu... Romina indicates that Congress and President Biden have chosen to ignore all expert advice, cater to organized special interest groups and burden younger taxpayers with increasingly unaffordable costs. She indicates that Larry Kotlikoff, an economist, who has an outstanding knowledge of the SS Program highlights a schoolteacher whise lifetime benefits will soar by $830,625 under the SS Fairness Act. Moreover, an actuary, Elizabeth Bauer, calculates that public sector workers with only brief private sector employment will receive benefits that are 45%higher than those with identical earnings histories who paid SS FICA taxes throughout their careers. I thought you and other readers will be interested in this article.

[Tonster521]

@GailL1  Although I already knew that most teachers who work at least 30 to 35 years in Non-covered Employment are provided pension benefits that are "gold plated" ,your client is probably around the median payout in most Non-covered Employment Plans. FYI and other readers, "gold plated" is a term that is used in the pension benefit business that refers to above average pension benefits. Once again, FYI and other readers, 30 years of service is generally equal to 33.% (.011 per year of service) of a person's average earnings whether 3 year, 5 year, or best 5 years our of last 10 years. Years in excess of 30 years are generally compensated at .012 or 1.2% per year of service. If you do the math for 35 years which is the time factor for social security, you will arrive at 39% which is just about the WEP factor 40%. that was established in 1984. It appears to me that the National Commission for Social Security Reform in 1983 did their homework and placed everyone on a level playing field. As I said before, it is an insult to the Survivors and Spouses who along with their Worker Spouses (husbands and wives) who worked in Covered Employment and paid dual FICA taxes. They will be reduced or offset SS benefits and folks in Non-covered employment are not reduced or offset and will, in effect, receive a bonus up to the 90% Bend Point. Is this what Congress and the President call a level playing field? I thought the following statistics may be interesting. I reviewed the Teacher Retirement System in my State and found stats from 2020 which is the most recent published data. There are almost 106,000 participants in the Plan and the median pension is $61,597 per year. There are 263 folks paid over $200,000 per year (16 folks receive over $300,000 per year). There are 66,696 that receive $50,000 per year or more (includes the above noted 263). Although there are a few that have more than 35 years of service, the majority have between 32 and 35 years of service which suggests that after graduation from college, they worked to about age 55 (early retirement) and found work in Covered Employment. Of course, some may have simply retired and did not work in Covered Employment..As you mentioned in another post, the SSA does not know who worked and who did not work in Covered employment after working in Non-covered employment.   

[Tonster521]

@GailL1 From a fiduciary position, Congress was not thinking. I believe that most Congressmen and women did not read or study the available information regarding WEP and GPO. The WEP is a formula calculation that can be prorated on an individual basis based on all career earnings which back in the 1980's was not available. Instead, Congress repealed the WEP and reinstated overpaying people with a government pension from Non-covered Earnings. The GPO repeal is an insult, if not a kick in the teeth, to the Survivors and Spouses who paid FICA taxes along with their Worker Spouses in dual Covered Employment. As you know, those Survivors and Spouses' SS Benefits are reduced or offset by their Worker Old Age (Retirement) SS Benefits. In comparison, if you did not pay FICA taxes because of working in Non-covered employment, you will get a bonus SS Benefit or paid twice without any offset. Moreover, these Survivors and Spouses with a government pension will be paid from the SS Trust causing an earlier depletion of the SS Trust and a cost to the Survivors and Spouses. In effect, the Survivors and Spouses that worked in Covered Employment are paying for the Survivors and Spouses who did not pay FICA taxes because of working in Non-covered employment. Moreover, the Survivors and Spouses that worked in Non-covered employment receive government pensions that are anywhere from 2 to 3 times greater than Covered employment SS Benefits.

I recall a certain Speaker who stated to members of the House to just vote on a Bill and read it later. If you worked like that in the private sector and could not explain and support your decision, you would be fired.

[fffred]

@Tonster521 You bring up really good points in your posts. I wish that our governing representatives (Representatives, Senators, and the Executive branch) would have listened to the points you and GailL and others have made. This post has given me even more insight into this whole issue. It is incredibly disappointing and disillusioning to see how this has been "handled" by our government.

[GailL1]

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@sgm55 wrote:

Please post a link to the source of your claim, pertaining to how the income tax we currently are forced to pay on our social security income, that we've earned, will, if that payment is done away with, shrink the fund. 

MY REPLY:  Because that is where the taxation on benefits goes now and always has -  here is the balance sheets for the income data - see the one entitled Old-Age, Survivors, and Disability Insurance Trust Funds Income

SSA.gov - Trust Fund Data 1957 - 2023 

INCOME for the Trust Fund comes from these sources:  Payroll taxes and employer match, interest paid on the special treasuries where any reserve not used to pay benefits is kept, taxation on benefits and misc General Fund Transfers for various items (consult the footnote for a breakdown)

=====================================

@sgm55 wrote:  I submit that we do away with that forced payment, which is an insult to those of us who worked hard all of our lives, AND had the good sense to invest and save so that we have a good income from our investments, to this day.  I strongly suggest that we do away with that tax on our senior incomes, AND do away with the BILLIONS OF DOLLARS we currently dole out to countries that we have no business supporting, monetarily. That saved money will be more than enough to keep the SSA sitting pretty in the years to come. 

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My Reply:  We all paid into the system and now some of us are taxed on a PORTION of our benefit depending on how much we make.  We are the fortunate - we aren’t just living off of a Social Security benefit - we have other income that we use to live out our senior lives - yet we are still members of this system.  

Nobody - not us nor our employers ever paid any taxes on the part of the contribution which the employer matched but it went into the system to be drawn out by US.  So this is a way we can give a bit back into the system.

Social Security is a closed system - laws are there to validate where the funds MUST come from to fund the Trust Fund from which all benefits come - laws are there to validate who can actually get any of the benefits from the Trust Fund under the different programs of (1) Old Age Retirement and Spousal Benefits (2) Survivors Benefits  (3) Social Security Disabiltiy benefits ( which differs from Supplemental Security Income or SSI which is a welfare program (General Fund) for those who are blind, disabled or aged and have either NO Social Security benefits or a very minimal amount of them [less than $943 / month].

Of course, we can legislate to change the system in whatever way is done by lawmakers - but is that wise and when the funds are no longer covered by the TRUST FUND where our entitlement to benefits has been founded and set in stone, we could just opt to give to those in need and the system would be dissolved in its entirety to just another welfare program.  

You don’t have any idea how the system works - do some reading cause it is all there to take in -

[BalbonisMoleskine]

Here's an idea: Eliminate taxes on SS benefits and tax 100% of the beneficiary's assets (e.g., home, life insurance, savings) upon death. This will recoup the cost of the lost taxes and increase the likelihood that the SS Trust Fund will have enough money to continue to pay living retirees. 

This wouldn't be much different than the federal estate recovery rule, which requires states to put a lien on Medicaid recipients' assets (e.g., home, life insurance, vehicle) to recoup the cost of providing care so taxpayers don't have to shoulder that burden. 

[GailL1]

@BalbonisMoleskine 

I will have to think about that one a bit before replying BUT at least your thinking is moving in the right direction.  

👍