The taxing situation for Social Security benefits

For a bit more than half, those of us receiving Social Security have at least 50% of our benefit subject to federal income tax.

When enacted in 1983 only 10% of Social Security beneficiaries had the benefits taxable. Today about 56% do. The income brackets subject to taxation we’re intentionally not indexed.

If you are interested in the history of taxing Social Security benefits, you can read the full history HERE

Many people think taxing Social Security benefits is unfair. I don’t. My pension is taxed because it was funded by my employer. My Social Security benefits also were funded by others. There is a big difference between something being taxable and paying taxes.

About 90 percent of households making less than $30,000 (the lowest-income 20 percent of households) pay no federal income tax as do about half of those making between $30,000 and about $60,000 (the next 20 percent).

Of the 72 million households that will pay no federal income tax this year, about 24 million, or roughly one-third, are age 65 or older. [that means about 42%of Americans 65 and older pay no income tax regardless of the income source]. Many likely are living primarily on their Social Security income. Roughly the same number are families with children, most of whom benefit from the CTC and many who claim the EITC.

Tax Policy Center

Ignorance and pandering abounds. Look at this from the Congressman Webster and Senior Citizen League

Both are inaccurate and misleading – intentionally most likely. There is no double taxation. You are not paying taxes on the portion of the benefit you – at least in theory – paid for. Regardless of the portion of a Social Security benefit that is taxable, 42% of seniors pay no income taxes in any case. I presume those not paying any tax includes the poor⬇️

Washington, D.C. — Florida Congressman Daniel Webster (R-Clermont) joined Rep. Thomas Massie (R-KY) in co-introducing H.R. 3206, the Senior Citizens Tax Elimination Act. This bill assists middle-class seniors by eliminating the unjust double-tax on Social Security benefits.

“For decades, seniors have paid into Social Security with their tax dollars. Now, when many seniors are on a fixed income and struggling financially, they are being double taxed because of income taxes on their Social Security benefits,” said Rep. Webster. “This is wrong, and I’m pleased to once again co-introduce this legislation to repeal this tax.”

Daniel Webster

These proponents for no taxation fail to mention any income taxes paid are sent to the Social Security Trust – about $36 billion a year. Another $32 billion is paid to the Medicare Trust from the taxation of benefits between the 50% and 85% levels.

The taxation of Social Security benefits is double taxation, and it affects only Social Security recipients. Unlike tax brackets which are adjusted annually for inflation, the income thresholds that subject your Social Security benefits to taxation have never been adjusted. Each time you receive a COLA and your income grows, you could wind up owing a bigger share of your Social Security benefits in taxes.

This war on seniors is bad enough that I shouldn’t need to mention how this goes on against the backdrop of tax cuts for the wealthy. And yet there it is, staring at me: the rich get richer and the rest of us are left to struggle. It’s ageist, it’s double taxation, it’s robbing from the poor, and I’m tired of it. [Ed note: The poor don’t pay any income taxes on Social Security or any other income]

Self-reliance and independence are two hallmarks of American identity that we just celebrated on the Fourth of July.

Well, right now, we’re staring down the barrel of seniors losing some of their hard-fought self-reliance and independence, all because of an ageist policy of double taxation on social security recipients.

E-mail from The Senior Citizens League

Keep in mind the payroll taxes you pay are only a portion- the largest of – of the funding supporting Social Security and there is no relationship between the taxes you pay and the benefits you receive.