Bill Introduced To Eliminate Federal Taxation Of Social Security Benefits?

[almost there]

Yea, that was a sneaky one for sure. But am sure some will defend it. Somehow.
$34,000 in 1983 is equivalent in purchasing power to about $107,736.65 today,
$44,000 in 1983 has the same "purchasing power" as $139,423.90 in 2025

 

[pb4uski]

Yes. Here are 3 articles I have linked to in past posts in recent years that have talked about it. I think the average person doesn't really understand they are being hit with this tax increase every year. ...

Not for many. Once you are 85% then you generally continue to be 85%. And if the SS cola is about the same as the inflation in tax brackets then the tax rate is the same. So I don't see any "tax increase every year".

Now for someone who is migrating from 50% to 85% because of inflation there might be an element of truth to your assertion but that population is pretty narrow.

 

[pb4uski]

Yea, that was a sneaky one for sure. But am sure some will defend it. Somehow.
$34,000 in 1983 is equivalent in purchasing power to about $107,736.65 today,
$44,000 in 1983 has the same "purchasing power" as $139,423.90 in 2025

Or was it intentionally a "stealthy" way to phase in 85% for everyone (like in 100 years) since it wasn't politically practical to apply 85% to everyone to begin with.

The 15% was based on the population as a whole. if you did a calculation of benefits to contributions similiar to the calculation of taxable benefits for contributory pension plans, I suspect that people receiving lower benefits contributed a lot less than 15% towards what they receive so if in 100 years it is effectively 85% for everyone, they are still getting a substantial benefit.

I'm not complaining, just observing.

 

[pb4uski]

AI doesn't know anything that I didn't already tell you in post #8.

90 posts ago. Reading comprehension is hard.

 

[NomDeER]

$3400. Their tax bill on $100K of income would be less than $4K.

Yes, with the only income being 40K of SS, their taxes now would already be $0.

Yep. In other words, it is the more affluent who would benefit from the elimination of taxes on Social Security.

The only issue I have are the insanely low poverty level limits they have set. $34,000 for individuals or $44,000 per couple for 85% of SS to be taxed.

Poverty depends on other things as well. As discussed above, the guy who was receiving 24k in taxable income was actually receiving significantly more in total income. And there are other things that affect cost of living and true poverty. I don't own a home. I might receive the same income as someone else who has a very expensive house (along with a very big IRA).

The only issue I have are the insanely low poverty level limits they have set. $34,000 for individuals or $44,000 per couple for 85% of SS to be taxed. Could add an easy 100k or 200k to each. That might help the folks that really need it. And might make it easier to get passed. Just my 2 cents.

Six figure incomes are poverty level?! Gee, I wish I were that "poor." Why should someone with that kind of income be able to escape paying taxes on Social Security? What else are we not going to tax for retired people who are that "poor?" Pensions? Capital gains? IRA withdrawals?

Also, as I understand it, the $34k and $44k are based on "combined incomes," which doesn't even include all of your Social Security. I think it's only half.

 

[almost there]

Yep. In other words, it is the more affluent who would benefit from the elimination of taxes on Social Security.


Poverty depends on other things as well. As discussed above, the guy who was receiving 24k in taxable income was actually receiving significantly more in total income. And there are other things that affect cost of living and true poverty. I don't own a home. I might receive the same income as someone else who has a very expensive house (along with a very big IRA).

$134k or $244k is poverty level?! Gee, I wish I were that "poor." Why should someone with that kind of income be able to escape paying taxes on Social Security? What else are we not going to tax for retired people who are that "poor?" Pensions? Capital gains? IRA withdrawals?

The point was it was capped in 1983 at 34k and 44k. Then less than 10% paid tax on SS. Now? 56% pay tax on SS. What else? A Prop tax break for seniors would be a nice addition.

 

[TheWizard]

The point was it was capped in 1983 at 34k and 44k. Then less than 10% paid tax on SS. Now? 56% pay tax on SS. What else? A Prop tax break for seniors would be a nice addition.

I think you you're missing the point of that legislation...

 

[NomDeER]

The point was it was capped in 1983 at 34k and 44k.

I see no good reason why that should have been the case. Also, you said that these were insanely low "poverty limits" and that they should be 100k or 200k higher. That isn't "poverty" IMO. There isn't a good reason for not paying taxes on Social Security when people making less are paying taxes on pensions and other income. Eliminating the Social Security tax isn't going to help the poor. It would just be another tax break going to people who have more money. "Hey, they did it before (sort of, for different reasons)" isn't a convincing argument to me.

 

[GenXguy]

Not for many. Once you are 85% then you generally continue to be 85%. And if the SS cola is about the same as the inflation in tax brackets then the tax rate is the same. So I don't see any "tax increase every year".

Now for someone who is migrating from 50% to 85% because of inflation there might be an element of truth to your assertion but that population is pretty narrow.

I said the average. Are YOU average? And there are many who are paying income tax on LESS than 50% of their social security who are getting caught by this stealth tax increase.

Also, as I understand it, the $34k and $44k are based on "combined incomes," which doesn't even include all of your Social Security. I think it's only half.

I mentioned this:

Bill Introduced To Eliminate Federal Taxation Of Social Security Benefits?

You might want to file an amendment if it's not too late.... What is self-employment tax? Self-employment tax is a tax consisting of Social Security and Medicare taxes primarily for individuals who work for themselves. It is similar to the Social Security and Medicare taxes withheld from the...

www.early-retirement.org

Yea, that was a sneaky one for sure. But am sure some will defend it. Somehow.
$34,000 in 1983 is equivalent in purchasing power to about $107,736.65 today,
$44,000 in 1983 has the same "purchasing power" as $139,423.90 in 2025

It's really unfortunate that they didn't index it to inflation at the time or at least increase it signficantly per past legislation that ended up not going anywhere.

 

[almost there]

I see no good reason why that should have been the case. Also, you said that these were insanely low "poverty limits" and that they should be 100k or 200k higher. That isn't "poverty" IMO. There isn't a good reason for not paying taxes on Social Security when people making less are paying taxes on pensions and other income. Eliminating the Social Security tax isn't going to help the poor. It would just be another tax break going to people who have more money. "Hey, they did it before (sort of, for different reasons)" isn't a convincing argument to me.

I have to think part of the reason it was passed in 83, was 34k and 44k was a livable income.
And everyone agreed to it. (Today thats the same as 107k and 139k)
"In 1983, the median family income in the United States was $24,580,"

 

[NomDeER]

I have to think part of the reason it was passed in 83, was 34k and 44k was a livable income.

Once again, it isn't really 34K or 44k. The "combined income" was those numbers, but the "combined income" excludes half of the Social Security. If you've got 42k in Social Security and 24k in taxable pension income, then you've got 66k in income (not counting stuff like Roth IRAs), but only 45k in the "combined income" that determines how much is taxed. You are just over the threshold. But, even then, keep in mind that the tax is not 85% and the amount taxed isn't even 85%. If you are over the 44k, you can have "up to 85%" of your Social Security income taxed. You still have to look at how much over you are, and you still have the standard deduction and tax brackets to take into account.

I just plugged these numbers into two different online calculators, and do you know how much of this couple's Social Security would have been potentially taxable for 2024? $6,850.00 But, then you still have to take into account the standard deduction, the tax bracket, etc. to determine the actual amount of tax. Shockingly, according to AARP's tax calculator, after taking into account the standard deduction, tax brackets, etc. this couple would owe only $167.50 in taxes. Do people really think that it is outrageously horrible that a couple bringing in $66k per year pay these taxes? About one half of one percent of their income? Granted, if their pension income had been just $1k lower, they would have paid no taxes, but big deal.

 

[Gumby]

I have to think part of the reason it was passed in 83, was 34k and 44k was a livable income.
And everyone agreed to it. (Today thats the same as 107k and 139k)
"In 1983, the median family income in the United States was $24,580,"

Do you read what I write? I told you exactly how to calculate the amount of social security that is taxed. You should use actual numbers instead of constantly saying $34,000 and $44,000 as if that is some sort of talisman.

 

[pb4uski]

I have to think part of the reason it was passed in 83, was 34k and 44k was a livable income.
And everyone agreed to it. (Today thats the same as 107k and 139k)
"In 1983, the median family income in the United States was $24,580,"

But I think you and others are missing the whole point.

What they wanted to do in 1983 was to tax SS similar to contributory pension plans since they are so similiar. Based on calculations by the SSA's actuaries, they settled on 85% as a general rule. Admitedly, it was broad brush, but they wanted to have everyone pay tax on 85% of their SS benefits.

However, 85% for everyone wasnt going to fly politically so they came up with the current approach as a compromise. They INTENTIONALLY didn't index the $34k and $44k because the desired result was that eventually everyone would pay tax on 85% of their SS. What you folks are bitching about is exactly what they intended and is consistent with how other similiar contributory pensions, pension annuities are taxed (not taxed on contributions).

I don't have any problems with this. The way the benefit formula works, 85% is probably low for lower benefit recipients, but that is ok.. even once everyone is paying 85% they will get a small break compared to what it should be and that is fine.

 

[USGrant1962]

^^^^

While that is all true and correct, the real point people are missing is that the 1983 law was intended to financially save Social Security for ~50 years, which it did!

Not inflating the taxation levels was part of that. If they inflated the brackets SS would be insolvent much sooner. We wouldn't have built up the trust fund as much and would have run out of money sooner.

As folks have noted, we have a progressive income tax system where the bottom half pay little. IMO, there is no reason that doesn't apply to SS recipients. Nothing special about being old, except you already get a higher standard deduction at 65.

I'm not going to look it up again, but in one of these umpteen SS threads I found a report that showed the SS actuaries at the time forecasted the fix would last about 50 years. 1983+50=2033, I was actually amazed at the accuracy. Since then my go-to on SS forecast has always been the Trustees Report.

The 2024 OASDI Trustees Report

2024 Trustees Report

www.ssa.gov

 

[NomDeER]

even once everyone is paying 85% they will get a small break compared to what it should be and that is fine.

And, to address the issue of what people will actually pay, I don't think that there ever will be a point where everyone is actually paying taxes on 85% of their Social Security benefits. They would have to eliminate the standard deduction for that to happen.

The author of one of those pieces linked above who is complaining about the lack of increase in the threshold says that we should demand Congress index Social Security taxation to inflation and ensure that only singles making over about $64,000 year, and couples making over $82,000 a year, would have to pay any taxes on their Social Security income. But, IMO, they don't give a convincing reason why that should be the case. I think I should be taxed on my pension (and I am other than my own post-tax contributions) and also should be taxed on my Social Security.

 

[Gumby]

...Nothing special about being old ....

 

[GenXguy]

While that is all true and correct, the real point people are missing is that the 1983 law was intended to financially save Social Security for ~50 years, which it did!

But WEP / GPO was part of that law, and it was eliminated, and that helps people who are better off. I don't think it's good to be increasing taxes every year on lower income seniors at are now having to pay taxes on part of their SS while giving extra benefits to those that need them less, not to mention spousal benefits to people that never earned them.

Indexing to inflation isn't really "increasing" the thresholds any more than adjusting tax brackets to inflation is "increasing" taxes.

 

[pb4uski]

....not to mention spousal benefits to people that never earned them....

I'll concede that you are consistent.. like a broken record.

Also, this is off topic and has nothing to do with taxation of SS, so I'm not sure what the point is other than to be annoying... yet again.

 

[Aerides]

I'm getting tired of this continual whining about SS taxation and the unlikely to be approved bill on its removal.
If I was a moderator here, I would lock this thread right now...

You are always welcome to use the Ignore function on any thread that you tire of. Or use the "report" function when you notice something that violates community rules.

 

[Aerides]

And with that, for now, this thread has run its course. Should the bill or one like it leave committee for actual congressional consideration, the discussion may be reintroduced.