- Joined
- Apr 14, 2006
- Messages
- 23,275
...The government told me one thing in 1965 when I made my first payment,...
The Supreme Court decided Flemming v. Nestor in 1960, before you ever contributed, so you were on notice that things could change. And, as others have noted, tax laws change all the time. At one time, there was no alternative minimum tax. Now there is. Once, you could deduct interest paid on consumer debt. Now you can't. Once, you could deduct the full amount of your state and local taxes (SALT). Now SALT deduction is limited to $10,000 per year. And so on and so forth.
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Basically, since we already paid taxes on the money we put into the TRUST fund, the money can’t be taxed a second time when we take it back out.
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As has been explained to you before, only about 15% of your current social security payment is a return of your contribution. The other 85% represents growth on your contributions, which has not yet been taxed. That's why they picked that number in 1993. For purposes of comparison, I receive a pension to which I contributed over the years. So I have a "basis" in my pension. When I receive payments, some of that amount is a return of that basis, so I deduct that percentage out of my payment and pay taxes on the rest. It works the same way with post tax contributions to a tIRA. I unwisely made such contributions back in the 1990s. So now, when I take a tIRA distribution, I subtract out a percentage representing my basis and pay taxes on the rest. I keep track of that basis with Form 8606.
As to your point about the Treasury rulings, it is a basic legal principle in the United States that while executive branch agencies like the US Department of the Treasury can interpret the laws, only Congress can make the laws. So Congress is not bound by Treasury rulings. Rather, Treasury is bound by the laws that Congress makes. In 1983 and 1993, Congress changed the law.
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