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Post Info TOPIC: Tax-on-TaxY
Mastersvoice

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Is anyone aware of progress -- or lack of it -- in the effort to keep Social Security income from being taxed? Even my very conservative congressman could not give me a straight answer.



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I have been trying to get an answer to that question also. I contacted Senator Marco Rubio's office (here in Florida), but have not received a response yet.

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I tried to explain to my husband how his Social Security affected our taxes and suggested withholding.  He has had a couple of strokes and doesn't understand a lot of things. The logic for not taxing Social Security in the beginning was that it was taxed when earned, so it should not be taxed again.  I tried to explain that Congress taxes whatever it wants and logic has nothing to do with it.  I finally just changed my withholding to keep peace.

I would sure like to see it go back to where it was.  However, I don't expect it to happen as long as we use static scoring (I noticed Paul Ryan is changing that) and paygo (which is a joke).



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Mastersvoice wrote:

Is anyone aware of progress -- or lack of it -- in the effort to keep Social Security income from being taxed? Even my very conservative congressman could not give me a straight answer.


 

As you may know, one in three persons collecting Social Security must pay income tax on part of their Social security benefit. When the "combined" household income is over $32,000 the tax kicks in.
 
In meeting with Staffers of House and Senate members we have been told the chance of eliminating that tax is almost zero. It would cost the Treasury 20 billion dollars a year in lost revenue, and with the budget deficit- that would be impossible to do.
 
AMAC disagrees. Dan Weber, president of that organization noted that the annual interest on the National Debt is 450 billion dollars each year. If we could lower our national Debt and reduce the interest we could easily afford to eliminate the unfair tax.


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As I understand it, the revenue generated by taxing our SS benefits was to be used to bolster the SS funds. Apparently, that has not happened. I have never seen the actual bill and so do not know if such a clause is even included or was just a suggestion made at the time in order to get Congress to pass such a tax instead of cutting spending. If such a clause exists, it is time someone asked for an audit as to just how much of the revenue gleaned from the tax on benefits has been placed into the SS Trust.

Meanwhile, perhaps Congress could be persuaded to limit this tax to a single person whose adjusted gross income exceeds 50K, with 100K for a married couple. I know people who have been legally divorced but continue living as husband and wife just to avoid a lot of government regulation on their lives and income. This is especially true in cases where one spouse is very ill. Just a thought!

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Mark Levine has a really good handle on what is being planned by the demwits, if you can, listen to what he has to say on the issue. It will not make anyone happy.

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An offset to the tax revenue could be the elimination of some of the exorbitant benefits received by congress. Like that will ever happen


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Linda


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In Arizona, my SS and my USG annuity are taxed; wish they weren't. They comprises about a third of my annual income. I don't think there ever was a Al Gore "lock box;" it's a Ponsi scheme alright. The only way to pay for it for retired folks is to have more people paying into it for more years. I've been paying it since my teenage years; now I'm nearly 70!

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Barney


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The Social Security tax is 25% of Federal income, Social Security benefits, just 20% of the Federal budget. It has become just another tax added to revenues. Fat chance it will be changed.

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I'm afraid AMAC will get a black eye from just becoming another special interest group looking for carve outs it the tax code. Better to stick with the larger reform plans IMO. Or advocate some adjustment at the very bottom line - perhaps a larger personal deductible in retirement or credit for premium paid (a much smaller amount than the amount being paid out.)

Note that already those with only SS income do not directly pay income taxes (they pay plenty of other taxes however) and the amount paid in the lowest bracket is small. Those with income above that are most likely receiving fixed income from assets (including retirement plan assets) and, unless you are comfortable with the government getting into taxing net worth (or establishing means testing), I'd suggest you accept paying income tax on the fixed income.

One area I think AMAC may be missing the boat is with COLA reforms. Granted the COLA should reflect the cost of living for those in retirement more accurately. However, the really big threat to SS income may very well be inflation. The debt bubble will burst one day and we will be lucky if we just experience double digit inflation. I've noticed that congressional and AMAC reform plans cap COLA at 3 or 4% a year. This will not be adequate when the government is forced to inflate our way out of debt. Better to make that route harder by not capping COLA, or cap it with a formula that more closely tracks subsistence cost of living including inflation.

I'd suggest whenever you have the chance ask the politicos or AMAC staff why the cap on COLA? And when they say to protect the SS fund from inflation ask them what you should do when your COLA is 4% and inflation is 10+%?

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