About half of Social Security recipients will be taxed on their payments this year, according to a new report. The Senior Citizens League, a nonprofit that advocates for the elderly, says as much. According to the research, 49% of Americans anticipate paying the tax. Nearly half (47%) of last year’s recipients claimed to have paid the tax.
There’s a problem in plain sight with the Social Security tax. It’s an unintended consequence of a tax on middle-class seniors. That’s because the people who pay taxes on their benefits are also taxed on their contributions. This is an aggravating case of double taxation.
Actually, it’s even worse.
In the trust fund, your money isn’t invested like a conventional pension fund. Instead, Uncle Sam gets the money at cheap interest rates so he can spend it on the government.
It’s time for the president to do something about his dwindling popularity while also aiding the middle class and doing what’s right.
Only in 1984, thanks to a panel sponsored by Alan Greenspan, did the taxation of Social Security benefits begin, and the tax thresholds were never adjusted in line with inflation.
Repeat: Inflation is never indexed.
If you make moreover $25,000 a year (or $32,000 for joint filers), your benefits will be taxed this year.
It was $25,000 a year and $32,000 for joint filers in 1984 when the tax was first introduced.
Wages and prices have increased threefold in the intervening 38 years. No change in thresholds has occurred either.
It’s now affecting nearly half of all Social Security claimants, rather than just the top 10% as it was before.
In 1984, the typical household income was $26,000, falling just shy of the poverty line. It’s currently worth around $80,000 today.
Mary Johnson, an analyst with the Senior Citizen’s League, points out that, unlike other federal income taxes, Congress has never altered the income criteria that trigger the taxation of Social Security payments.
Even worse, the tax only applied to half of your benefits when it was first implemented. However, as a result of additional tax increases enacted in 1993, it has risen to 85 percent of your benefits. In the 85 percent tax bracket, your annual income must exceed $34,000, or $44,000 for joint filers.
This is not a trivial matter. According to the trustees’ most recent report, this double tax (or triple tax) cost older persons $41 billion last year. This year, it’s anticipated to cost $44 billion. But that’s not all; in seven years, the Social Security administration expects tax receipts to more than treble, reaching $100 billion a year.
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Because inflation drives individuals into higher tax rates, both for payroll taxes when they’re working and for this taxon benefits when they retire, it’s one of the dirty little secrets of Social Security that the government is relying on it to save the system.
At the very least, the case for taxing half of the benefits makes sense. Social Security contributions are deducted from a company’s corporate income tax since the employer theoretically pays half of the expense. In other words, the larger percentage is nothing but a sham.
In addition, taxing just 50 percent of benefits is an outrage. Essentially, this means that you’re paying some of your employer’s corporate income tax.
It’s little wonder that being a shareholder has always been a better option than being a wage-earner for decades. Because this is the only pension fund on the earth that doesn’t invest your money in the stock market, Social Security recipients gain no advantage from it. )”
Social Security recipients will not profit from this as a result of the triple taxation described above. Unlike other pension funds, this one does not invest your money in the stock market but instead loans it to the fund’s manager at a low rate.