'Win-win': Bill to eliminate taxes on Social Security benefits reintroduced

[Omaha Steve]

https://www.msn.com/en-us/money/retirement/win-win-bill-to-eliminate-taxes-on-social-security-benefits-reintroduced-it-would-also-extend-the-program-s-shelf-life-by-20-years-here-s-what-you-need-to-know/ar-BB1hUXS9

Story by Serah Louis • 3d

A recently reintroduced bill in the U.S. House could scrap federal taxes on Social Security benefits starting in 2025, putting more money back into the pockets of retirees.

On Jan. 25, Rep. Angie Craig, D-Minn., reintroduced legislation, dubbed the “You Earned It, You Keep It Act,” that would repeal the taxation of Social Security benefits, while also extending the program's solvency by 20 years.

“This bill is a win-win — it's a tax cut for seniors and a way to ensure more Americans can depend on the Social Security benefits they’ve earned,” Craig said in a press release.

Here’s how the bill would work.

How it will be paid for
Folks with a combined income — which includes your adjusted gross income, plus nontaxable interest, plus half of your Social Security benefits — of $25,000 or more (and couples filing jointly with a combined income of $32,000 or more) currently pay taxes on at least 50% of their benefits.

According to the Social Security Administration, about 40% of people who receive Social Security benefits end up paying taxes on them each year. This is a major source of revenue for the Social Security Old-Age and Survivors Insurance Trust Fund.

FULL story at link above.

Because of this story, I gave $5 to Rep. Angie Craig's ActBlue page: https://secure.actblue.com/donate/angie-craig-2?refcode=directory

[Charging Triceratops]

1. Fixing another Reagan disaster

This bill is an excellent idea!

[Voltaire2]

44. It was a bipartisan hit job.

Our own ‘Tip’ O’Neil negotiated the ‘reform’ that included the tax thresholds that mysteriously are not inflation adjusted, resulting in an effective tax increase every year.

[MichMan]

56. Yep, everything Reagan signed into law had to pass the House first

[calimary]

55. Anything that reverses something Reagan is good for America.

Especially anybody not rich. The “Left-Outs”, you might call ‘em. The folks still waiting for their turn, which will never come because selfish pricks like Reagan always worked to make sure the wealthy and privileged could cut in front of them when the line started forming.

I STILL hate Ronald Fucking Reagan. I don’t think I’ll ever stop hating that slick-talking bastard.

[jimfields33]

2. Please let this happen

It’s silly to pay taxes on social security. I’m a decade away, but I see how it can benefit many.

[ArkansasDemocrat1]

14. Get it early if you can. My oldest friend just died at age 60 of liver cancer, so no SSA ever after paying

into it all their life. Their spouse won't get but 1/3 of a spousal benefit after they get old enough to draw it in 15 years. Waiting to draw it doesn't work sometimes.

[jimfields33]

18. I'm sorry to hear that.

I’ll definitely listen to your great advice.

[ArkansasDemocrat1]

23. The annual COLAs are in normal times failing to keep up with actual inflation

We got a big bump last year which was nice, but now it's back to buying catfood 'cause the rent alone went up more than the COLA. Yaay

[ArkansasDemocrat1]

62. I can't even grieve yet

[ProfessorGAC]

50. At Least Here In Illinois, We Don't Pay State Income Tax...

...on SS benefits. Actually we don't pay state income tax on any retirement income.
It's probably why even more people don't flee to zero income tax states.

[Freddie]

51. Same in PA

[MichMan]

57. No state income tax on IRA or 401k withdrawals either?

[ProfessorGAC]

59. Correct

I've been retired over 5 years & the only state taxes I pay are from the piddly money I make from substitute teaching. My wife's IMRF retirement money is also untaxed.
So, both SocSec payments, my IRA (it's not a 401k anymore, has to be rolled into something else, but effectively the sane thing), and her small pension are all untaxed.
Because SS, her pension, and the annuity inside my IRA are withheld, we get 100% of that back come tax time. The IRA dividends aren't withheld because I had the option on that, and knowing it would all be refunded, it didn't make sense to take anything out.
This conversation is good timing. It reminds me I have a tax preparer appointment tomorrow.

[Wounded Bear]

3. Another Reagan-era legacy that needs to die...

[bucolic_frolic]

4. "a major source of revenue for the Social Security Old-Age and Survivors Insurance Trust Fund."

So how will they replace the revenue? Means-testing SS, meaning taxes on higher aggregate earners, has been a funding source for decades.

I don't see how this strengthens Social Security.

[Omaha Steve]

5. Raising the cap

It is further down in the story: However, Social Security benefits are also financed through a payroll tax that comes with a cap on higher earnings. Under the current law, Americans don’t get taxed for Social Security on annual earnings above $168,600.

The “You Earned It, You Keep It Act” would continue to fill the trust fund’s coffers by applying a Social Security tax to all earnings above $250,000.

[EYESORE 9001]

6. Once upon a time, I had a streak of years where i 'paid out' on SS payments

What happened? I’ll tell you. They raised the cap out of reach, yet those into well into six figures still managed to pay out at some point in the year, that’s what. I’ve long advocated for removing the cap altogether. It’s time for everyone to shoulder the burden equally. It’s the American thing to do.

[Shermann]

11. I don't see how Biden signs that unless the top limit is $400,000

This was a campaign promise.

[Freddie]

52. I'm a payroll admin

And I honestly don’t care what people (sometimes undeserving) earn, it’s not my problem. But when the well paid start getting even bigger checks because they’ve gone over the cap, it still pisses me off. Where’s my mid-year raise?

[dflprincess]

27. I had to read that a couple times before I figured out it must mean the cap

The taxes we pay on benefits go into the general revenue as income tax, not into the trust fund.

[GreenWave]

7. If you work like I do PLUS receive SSI it's clobbering time.

My job taxes me correctly but I think the tax gurus put that on later after they do the SS to max my tax. I owe $6 grand plus interest when I was never told what to pay in addition. Seems like entrapment to me.

[dflprincess]

26. Until I read your post I was feeling sorry for myself after doing my taxes this afternoon.

I started collecting retirement benefits last June and I'm still working. Despite having taxes withheld from my Social, I wound up owing the Feds close to $1,100 and the state (Minnesota) just over $700.

I'd best up the percentage I'm having withheld as I plan to work through the end of this year.

[Shermann]

41. Payroll taxes are estimates and assume it is your only income

You'd have to estimate the taxes on your SS and have that withheld every month, which it sounds like you figured out already.

[B.See]

8. If it's a win win for the "average Joe retiree"

Then expect Trump and his MAGA sycophants to hate it. ESPECIALLY if something introduced by a Democrat. Can't have that.

Any bets on how long it'll take them to fuck that up TOO?

[Conjuay]

9. I can hear the Republicans

Howling like wolves at a rising moon

[ArkansasDemocrat1]

15. Let them

[Kaleva]

10. Those of us who have only SS to live on don't pay tax

I guess it's a good deal for those making much more to not have to pay tax on their SS

[Pinback]

24. Makes a difference for some couples,

e.g those with one getting SS and the other getting SS + pension, or even a paycheck. Many in that boat are far from wealthy and would really benefit from this change.

[Kaleva]

46. From my perspective, they are well off

It's really not a big deal for me but I'm not going to cheer for folks who already have an income much greater then mine to get even more money to spend.

[TxGuitar]

48. But this would not hurt you

So why begrudge those it will help? I am younger than my wife and still working. She pays approximately 300.00 monthly as tax on her SS. We are not wealthy.

[barbaraann]

54. Perhaps a better idea would be to couple a tax credit for those without other income with a tax cut for those

with other income. People living just on Social Security are really struggling.

[Kaleva]

60. I'm not begrudging it but I won't support it either

If people who have greater incomes then those of us who rely solely on SS want it, they can fight for it .

[Voltaire2]

49. You can be taxed on only SS 'income'.

The tax thresholds are lower than the max benefits.

[Kaleva]

61. From the SSA

"About 40% of people who get Social Security must pay federal income taxes on their benefits. This usually happens if you have other substantial income in addition to your benefits. Substantial income includes wages, earnings from self-employment, interest, dividends, and other taxable income that must be reported on your tax return."

https://www.ssa.gov/benefits/retirement/planner/taxes.html#:~:text=Income%20Taxes%20and%20Your%20Social%20Security%20Benefit%20(En%20espa%C3%B1ol)&text=Between%20%2425%2C000%20and%20%2434%2C000%2C%20you,your%20benefits%20may%20be%20taxable.

[Voltaire2]

63. From the maths:

max SS benefit: $4,873/month * 12 = 58,476
50% of ss benefit: 29,238
Single file tax threshold: 25,000

You will be taxed on the excess.

[doc03]

67. That is incorrect the tax is not 50% it starts

Last edited Mon Feb 12, 2024, 03:47 PM - Edit history (1)

at 50% and increases up to 85%. I worked a union job and get a pension and take RMDs.
I went on strike for over a year in order to get a pension and put what I could into a 401k. Now being single I have to pay tax on that additional income plus I have to pay tax on 85% of my SS.
I am in effect paying tax twice on that income. I don't think $25000 makes me filty rich. I will pay over $5000 income tax this year. Shame on me for working hard and playing by the rules.

[Voltaire2]

69. Correct. It starts at 50%. With only SS benefits you don't get to 85%.

I was responding to the claim that if your only income is SS benefits you cannot be taxed on that income.

[AllaN01Bear]

12. wasnt it rr also who added co pays and deductables on top of the monies we already paid 4?

[kelly1mm]

19. No. Presidents do not pass legislation. The 'Reagan' SS changes were passed by a Democratic

controlled congress.

[doc03]

30. During the Reagan Administration a tax of up to 50%

on SS was passed. Then the Clinton administration raised it to 85% of SS. The threshold for taxing SS was $25000
for a single person and $32000 for married couple in 1983. That has never been adjusted for inflation.
Adjusted for inflation that would be $95k for a single and $100K for a couple. If you figure inflation in
time everyone will be paying tax on SS in a few years.

[kelly1mm]

31. Yes, I know. Both passed by Democratically controlled congresses. Neither Regan nor Clinton 'raised' anything. Only

congress can pass legislation, not Presidents.

[doc03]

32. Check my post again I added some information on edit. nt

[kelly1mm]

33. Again, neither the Reagan nor the Clinton administration raised taxes paid on SS. The Democratic

controlled congress did that in both administrations. Presidents don't pass laws. Congress does. It would be correct to say that taxes paid on SS were raised during the Reagan/Clinton administrations as that delineates a period of time. To say that either President 'did' that would not be correct. The congress did that during their terms.

[doc03]

35. What is your problem I said the Reagan and

Clinton Administration. Why are you so dead set on blaming Democrats? Either one of them
could have vetoed it.

Post 30

[kelly1mm]

37. Because there is a difference between what happens in the administration of X president

and what X president does. It is a fact that both the initial taxation of social security benefits during the Reagan administration and the raising of the taxation of social security benefits during the Clinton administration was done when Democrats controlled congress.

Since Democrats controlled congress during both these periods whom else should I blame?

[Happy Hoosier]

39. Both Presidents signed the Legislation...

… and proposed it. You make it sound like they were bystanders.

[kelly1mm]

40. They would have been bystanders had the Democratically controlled congress not have acted. nt

[doc03]

42. I don't know what you are trying to argue about, I said during the Reagan and Clinton

Administrations. It is right there in post 30 I said Reagan and Clinton Administrations, I don't really care who you want to
blame. Did you read about the threshold for paying tax on SS never being adjusted for inflation since 1983? That is the discussion here not who you want put the blame on.

[MichMan]

65. The term administration refers to the executive branch

No one would say that the Republican house is part of the Biden administration, or for that matter that the Pelosi led house was part of the Trump administration.

[doc03]

66. First of all my post was not in reply to you.

Second I don't a give a damn who pased the law and it has noting to do with the op. This is like the typical MAGA playbook change the subject rather than offering any opinion on the op itself.

[JoseBalow]

13. Of course repugs will line up behind this tax cut

oh wait...

[Hekate]

16. This would be fantastic. It is a huge injustice & slap in the face to retirees. We paid for it thru a TAX...

…and then we get TAXED on the same money.

Fingers crossed.

[Liberal In Texas]

17. The tax on seniors started by St .Reagan.

From the party that hates taxes....oh just a minute, only hates taxes on the wealthy.

[kelly1mm]

20. Last I checked the Democrats were in charge of the House the entirety of Reagan's administration.

How was this able to pass without the Democrats being complicit ??????

[sammythecat]

21. Good question

I'd like to see an explanation.

[haele]

22. I'll tell you the argument I heard...

It's "Double-dipping"
People who were 65 but still working were collecting SS and getting all that money free as well as their regular paycheck. Not like pension money where you actually had to stop working that job to get the full amount available. If you had turned 65 in the 1980's, and you had worked 10 years in two places and 20 at your final job, who cares if you were able to start collecting at the first two if you would only be looking at maybe an extra $60 a month combined; whereas your Social Security, if you were to start collecting, could be paying you up to $300 a month. Paid for by taxes that not only you paid, but others still working are paying.
Why, that's a moral hazard! You might be blowing all that taxpayer money on gambling, fast cars, and other frivolous things - like international travel or shopping sprees - that only rich folks should be wasting their money on.
How dare you have fun in your 60's on taxpayer money.

Haele

[kelly1mm]

29. So you are saying the Democratic congress fell for that? nt

[haele]

36. Everyone was falling for that, along with getting rid of pork barrel spending.

The Reagan Era was all about fiscal conservatism, even liberal politicians found themselves being challenged by "taxpayer organizations" constantly running to the media talking about wasting taxpayer money.
It's not hard to see how taxing Social Security because it would otherwise go broke if someone who didn't need it started drawing it went hand in hand with the rise of 401ks and the fall of Pensions.
Got to remember the Neo-Liberals and the Global Market Economists were convinced that Social Security was a government Ponzi scheme and Keynesian economics is a Socialist Fluke. And they were the ones with the upper hand in both the government and the media in the 1980's.

Haele

[Voltaire2]

45. The tax revenue from the ss income penalty goes into general revenue

It does absolutely nothing to improve the solvency of the SS trust fund.

Also, the Reagan years did not end 'pork barrel' legislation, they shifted spending from social programs that benefited basically everyone to military spending on things like 'star wars' that benefited the rich and powerful. Tax cuts for the rich, and huge increases in the war budget resulted in giant deficits that forced Bush I to raise taxes.

[Liberal In Texas]

25. It was bipartisan. But on the Social Security website...

The taxation of benefits was a proposal which came from the Greenspan Commission appointed by President Reagan and chaired by Alan Greenspan (who went on to later become the Chairman of the Federal Reserve).

Reagan did go on and on about how Social Security had to be saved and there were abuses in the system that had to be corrected.

I don't remember much about it at that time. In 1984 I was a jillion years away from retirement and probably didn't pay much attention to the details of this taxation bill.

[doc03]

71. Why has this evolved into a blame game with

you? Why are you hell bent on saying it was Democrats that passed it. I don't care who passed it, that has nothing to do with the op.
The fact is it was passed while Reagan was in office at 50% and was increased to 85% while Clinton was president. Instead of commenting on the subject of the op how did we go off on a blame game. Someone not me came out saying Reagan did it and you came to his defense, seems strange to have someone on DU defending RR. I couldn't care less who passed it, I would like it changed or at least the thresholds for tax adjusted to today's inflation.

[doc03]

28. That would save me a couple thousand dollars, I pay the full amount

of 85% on my SS.

[TxGuitar]

53. Us too

Mostly because I am younger and still working. Wife is on SS and we pay the tax on 85%. Si,ks

[Ferrets are Cool]

34. Damn, I do so wish that would pass.

[Silent Type]

38. Would have helped me over years, but don't see it happening. Would love to be wrong.

[Shermann]

43. The SS tax is a kludge

There are a number of warts on it.

1) It uses thresholds that never adjust for inflation and result in larger effective tax every year ($25000/$34,000)
2) It adds complication to an individual's marginal tax rate calculation. Normally this rate increases as your taxable income increases. However, due to the kludginess, your rate will increase at a certain income level, then when you reach the taxable percentage limit, start to decrease. This can make tax and retirement planning difficult.
3) Similar to 2, if you have a hybrid year where you transition from capital or ordinary income to social security income, this can create a spike in your social security benefits tax if you begin benefits mid-year.

Fix it or get rid of it, I say the latter. One possible solution is to just categorize the entire amount as long term capital gains and dividends.

[Voltaire2]

47. It should be eliminated.

However if it really bothers people that somebody with relatively high income collects social security: COLA adjust the fucking income thresholds. The single filer threshold would be 75,000 if it were inflation adjusted.

[spanone]

58. If it gives Biden a win, they'll tank it.

[maccafan]

64. Kudos to Angie Craig

Someone is trying to work toward solving a problem that was created a long time ago. It doesn't matter who created the problem it just needs to be fixed. As a retired widow I been experiencing the difficulties of the unfair SS taxation and it needs to be solved.

[Emile]

68. Probably won't go anywhere because

Congress will view it as a win for President Biden.

[brooklynite]

70. Angie know this is symbolism.

It will never come up for a vote in the House.