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GOP trying to end taxes on SS income

CatBoxCatBox Posts: 3,709 Captain
First of all, WHY IN THE HECK is SS income taxable in the first place?

Second, why hasn't this been done a long time ago?

I am sure someone will be along saying Mitt Romney needs to pay his "fair share" but seriously this seems like something that both sides would agree on. :shrug

GOP bill ends taxes on Social Security payments

Rep. Thomas Massie (R-Ky.) introduced a bill this week to eliminate income taxes on Social Security payments, a change he said would end the government's policy of taxing these benefits twice.

"Seniors have already paid tax on their Social Security contributions, so taxing Social Security is double-taxing by the federal government," Massie said Tuesday. "Taxing Social Security reduces benefits to seniors."

Massie's statement said the purpose of Social Security is to provide support during retirement, not to be another source of tax revenue for the government. He said ending the tax on retirement payments would restore the integrity of the program and keep the government from using the revenue to fund other programs.

"Taxing these benefits is an accounting sleight of hand that redistributes portions of the Social Security trust fund to other areas of government," he said.

Massie's Senior Citizens Tax Elimination Act, H.R. 3894, is cosponsored by Reps. Jim Bridenstine (R-Okla.) and Ron DeSantis (R-Fla.).

"Congressman Massie's bill blows the whistle on the federal government for double taxing the Social Security benefits of senior citizens," DeSantis said. "Individuals already pay taxes to support Social Security, so there is no reason why these earned benefits should be taxed on the back end."

http://thehill.com/blogs/floor-action/house/196119-gop-bill-ends-taxes-on-social-security-payments

Replies

  • bswivbswiv Posts: 7,877 Admiral
    Interesting idea.

    But let us first admit something......1/2 of the SS deposits made in the name of the employee were never subjected to income tax to begin with.

    Fact is that the so called "employer share" is a pre-tax item. Of course it is a BIG LIE that somehow the employer does not budget those dollars as part of the compensation he has to pay his workers, a lie that needs to be fully exposed. Still, if we are to continue the absurd taxation system we have, one that taxes production ( income ), and if we are to be consistent in its application ( Which we are not! ) then taxing SS, at least taxing the 1/2 that was never taxed to begin with, is not wholly indefensible.

    Mind you though......I hope the legislation passes.

    Still.......I wonder how Team D will spin it.......let's see.......oh wait......I got it......"The Rich" will get most of the tax savings from this. That's it........or maybe something about "working families"....?

    Who knows.
  • Lobstercatcher229Lobstercatcher229 Posts: 4,845 Captain
    These days I miss the "tax and spend" liberals. We have migrated to the borrow and spend liberals/progressives.

    I am not that excited about income taxes of any kind. But in this vast land with many different people I wish that we could somehow figure out how to match our taxation with our spending. I know, "good luck on that one."
  • phlatsphilphlatsphil Posts: 14,632 AG
    Agree, we should not tax SS. It's a good start, maybe next they'll propose to stop taxing unemployment. I've never drawn it, but I've heard it's taxable income. Why?
  • cadmancadman Home of the Gators Posts: 32,609 AG
    bswiv wrote: »
    Interesting idea.

    But let us first admit something......1/2 of the SS deposits made in the name of the employee were never subjected to income tax to begin with.

    Fact is that the so called "employer share" is a pre-tax item. Of course it is a BIG LIE that somehow the employer does not budget those dollars as part of the compensation he has to pay his workers, a lie that needs to be fully exposed. Still, if we are to continue the absurd taxation system we have, one that taxes production ( income ), and if we are to be consistent in its application ( Which we are not! ) then taxing SS, at least taxing the 1/2 that was never taxed to begin with, is not wholly indefensible.

    Mind you though......I hope the legislation passes.

    Still.......I wonder how Team D will spin it.......let's see.......oh wait......I got it......"The Rich" will get most of the tax savings from this. That's it........or maybe something about "working families"....?

    Who knows.

    None of your social security taxes are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it. The congressman does not have a clue.

    It is only taxed on higher income individuals. It was the plan instead of means testing the benefits or lowering them for higher wage earners. It was a dumb idea, but the only ones who will be effected are higher wage earners and this will be another "tax cut for the wealthy" if the republicans aren't careful. They should incorporate it into an overhaul of SS and means test the benefits and raise the retirement age to fix the program.

    Mini Mart Magnate

    I am just here for my amusement. 

  • Lobstercatcher229Lobstercatcher229 Posts: 4,845 Captain
    cadman wrote: »
    None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it. The congressman does not have a clue.

    It is only taxed on higher income individuals. It was the plan instead of means testing the benefits or lowering them for higher wage earners. It was a dumb idea, but the only ones who will be effected are higher wage earners and this will be another "tax cut for the wealthy" if the republicans aren't careful. They should incorporate it into an overhaul of SS and means test the benefits and raise the retirement age to fix the program.

    Interesting comments. I made a certain income this year. I had to pay social security taxes on that income. I do not recall anywere in the many years that I have done this of any kind of deduction in my income for social security taxes paid.
  • bswivbswiv Posts: 7,877 Admiral
    cadman wrote: »
    None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it. The congressman does not have a clue.

    It is only taxed on higher income individuals. It was the plan instead of means testing the benefits or lowering them for higher wage earners. It was a dumb idea, but the only ones who will be effected are higher wage earners and this will be another "tax cut for the wealthy" if the republicans aren't careful. They should incorporate it into an overhaul of SS and means test the benefits and raise the retirement age to fix the program.

    I'm confused.

    So the portion of SS that appears on a employees pay stub and on his year end statement is not included in the adjusted gross income that he pays income taxes on?

    Is that what you are saying or are we discussing something different?

    And I will admit that I do not, actually probably couldn't figure out how to do my own taxes and that for 30+ years we have left the job of getting the taxes for the employees filled correctly in the hands of a accountant.......so I could be confused.

    I did look around on the web for a minute just to see if it was easy to find. What I found was a IRS site that was incomprehensible and then another from CNN that referred to 1/2 of the self-employment tax being deductible, which would lead one to believe that the other half, which includes SS, is taxed.

    Maybe apples and oranges.........??
  • cadmancadman Home of the Gators Posts: 32,609 AG
    bswiv wrote: »
    I'm confused.

    So the portion of SS that appears on a employees pay stub and on his year end statement is not included in the adjusted gross income that he pays income taxes on?

    Social Security is a tax withheld from your check. You can't tax taxes.

    Is that what you are saying or are we discussing something different?

    And I will admit that I do not, actually probably couldn't figure out how to do my own taxes and that for 30+ years we have left the job of getting the taxes for the employees filled correctly in the hands of a accountant.......so I could be confused.

    I did look around on the web for a minute just to see if it was easy to find. What I found was a IRS site that was incomprehensible and then another from CNN that referred to 1/2 of the self-employment tax being deductible, which would lead one to believe that the other half, which includes SS, is taxed.

    Maybe apples and oranges.........??

    You are paying taxes on the income you earned. You did not pay taxes on the Social security tax. That would be the same as saying you pay taxes on the income tax withheld because you paid them on the income listed as gross wages. The tax is calculated on gross wages as is the income tax.

    Social Security is a tax withheld from your check. You can't tax taxes. You are paying tax on the oranges and not the apples.

    You are thinking of SS as an investment into a retirement account. It is not, it is a tax.

    Mini Mart Magnate

    I am just here for my amusement. 

  • CatBoxCatBox Posts: 3,709 Captain
    The SS tax was started in 1984 by McCain/Biden (a pox on both houses)and was indexed to inflation. Now it is biting the middle class.

    I found an interesting article on this.

    The Stealth Tax on Retiree Income
    Scott Burns
    Older readers start grinding their teeth when they get their taxes done. This year is no different. The grinding starts when retirees discover that their tax bill is a lot higher than they thought it would be.

    How can this happen? Simple. When Social Security was created one of the fundamental promises was that benefits would never be taxed.

    But that was then. Some retirees have been paying taxes on their benefits since 1984. That was when both parties, in a rare display of bi-partisan agreement, voted to begin the taxation of Social Security benefits. Two household names that voted for the bill are still in office: Vice President Joe Biden and Senator John McCain. Both purport to support middle class Americans.

    Few retirees protested back then. The reason for that is simple, too. The formula for the taxation of benefits is not indexed for inflation. So it acts as a stealth tax, rising as the dollar loses value. While only 3 percent of retirees were expected to pay any taxes back then, inflation has caused more than 30 percent of retirees to pay higher taxes today.

    Want to learn more?


    More will pay tomorrow, so it’s a genuine multi-generational hosing.

    The odd thing is that while both parties can get really pious about their desire to strengthen the middle class, the reality is different. The taxation of Social Security benefits is entirely a tax on middle class people who happen to be retirees. Efforts to repeal the tax have been defeated year after year. Indeed, the tax was increased during the Clinton administration.

    Don’t believe this is a middle-income tax? Well, hang in while we do some tax calculations with TurboTax.

    So let’s see how a tax bill changes by comparing taxes for normal taxable income— such as pensions, retirement account distributions and interest. Then we’ll see what happens when Social Security benefits are added. According to the Social Security website, the average benefits received by a retired worker and his non-working spouse now total some $23,343 a year. Here is how the tax bills compare:

    At an income of $18,000 our couple pays no taxes, with or without the addition of $23,343 in Social Security benefits.
    Increase other income to $24,000 for our couple and their tax bill would be only $86. But when Social Security benefits are added, the bill rises to $343. It’s a big increase, but it’s still a small amount.
    If other income increases by another $6,000 to $30,000— their tax bill would be $763. But when Social Security benefits are added, the bill rises to $1,265, an increase of 66 percent.
    Add another $6,000, so other income is $36,000, and their tax bill would be $1,387. When Social Security benefits are added, the bill rises to $2,561, an increase of 85 percent.
    If other income increases another $6,000 to $42,000 their tax bill would be $2,088, but including Social Security would increase the bill to $4256, an increase of 104 percent.
    Add still another $6,000, so their other income is $48,000, and their tax bill, without considering Social Security benefits, would be $3,004. But when benefits are added it goes up to $5,951, a 98 percent increase.
    Finally, if we add yet another $6,000, making their other income $54,000, their tax bill excluding Social Security benefits would be $3,920. It would rise by $3,023 to $6,943 when benefits are considered, an increase of 77 percent. The increase is smaller for this amount because all the Social Security benefits that can be taxed have been taxed.
    What’s important here is the total income being considered. We’re talking about a cash income range from $41,343 to $77,343 a year. We’re not talking about fat cats or the 1 percent. Yet Democrats and Republicans both voted to nearly double the tax burden of this group. And they have stood by that vote, year after year, defeating attempts to repeal the tax.

    The very fastest way to improve the income and security of middle-income retirees would be to eliminate this tax.

    So I have a suggestion. Next time someone running for national office wants to strengthen the middle class, ask what the candidates position is on HR 3894, the Senior Citizens Tax Elimination Act, and the latest effort to repeal this nasty tax.

    http://assetbuilder.com/scott_burns/the_stealth_tax_on_retiree_income
  • cadmancadman Home of the Gators Posts: 32,609 AG
    That means that 70% of retired Americans live on less than $25,000, if single or $32,000 if married filing jointly.

    I was not aware the tax kicked in at that low of an income.

    Mini Mart Magnate

    I am just here for my amusement. 

  • navigator2navigator2 Posts: 22,511 AG
    cadman wrote: »
    That means that 70% of retired Americans live on less than $25,000, if single or $32,000 if married filing jointly.

    I was not aware the tax kicked in at that low of an income.

    The beauty of not indexing exclusions for inflation, another tax screwing. No matter that SS is considered a tax, you should never have to include more than half of your benefits in your AGI. If you are in a government pension fund you are not taxed on your contribution each year and are not forced to pay into SSI either, just the medicare portion.
    [SIGPIC][/SIGPIC]
  • CatBoxCatBox Posts: 3,709 Captain
    navigator2 wrote: »
    The beauty of not indexing exclusions for inflation, another tax screwing.

    Exactly, the same thing with AMT :banghead
  • bswivbswiv Posts: 7,877 Admiral
    cadman wrote: »
    You are paying taxes on the income you earned. You did not pay taxes on the Social security tax. That would be the same as saying you pay taxes on the income tax withheld because you paid them on the income listed as gross wages. The tax is calculated on gross wages as is the income tax.

    Social Security is a tax withheld from your check. You can't tax taxes. You are paying tax on the oranges and not the apples.

    You are thinking of SS as an investment into a retirement account. It is not, it is a tax.

    I am quite clear that it is a tax and not any sort of dedicated account. Where the confusion lies is that income taxes are collected on what the IRS site called AGI......so is the employee share of SS included in the AGI? That was not so clear.

    And it is AGI ( less any other deductions that might arise ) that we calculate income tax rate from????

    I must admit that I always ASSUMED ( Yes I know! ) that SS & Med C came off the top before Income Tax rate was calculated.

    And this too. Is SS & MC included in the rate calculation for WC, as WC is based on income?
  • cadmancadman Home of the Gators Posts: 32,609 AG
    SS and Medicare taxes are calculated on gross wages, not AGI, unless something has changed in the law.

    Workers comp is calculated on gross wages as well, I am pretty sure.

    Mini Mart Magnate

    I am just here for my amusement. 

  • navigator2navigator2 Posts: 22,511 AG
    cadman wrote: »
    SS and Medicare taxes are calculated on gross wages, not AGI, unless something has changed in the law.

    The bolded portion is correct. However, if you opt out of SS and choose the government retirement plan while in their employ, your contributions toward the government pension plan (other than the medicare portion) are not included in your federal taxable wages. For example, if your employee portion that you contribute to the government retirement plan is 6,000 and your gross federal wages are 75,000, your federal taxable income is 69,000 and not 75,000. That is not true of the private sector, the mandatory SS employee contribution is not a deduction from federal taxable wages. You pay income taxes based on the entire W-2 stated earnings of 75,000.

    The tax code is neither fair nor based in logic, if it were, your would only pay income taxes for SS benefits based on the portion the employer provided, in this case half.
    [SIGPIC][/SIGPIC]
  • cadmancadman Home of the Gators Posts: 32,609 AG
    navigator2 wrote: »
    The bolded portion is correct. However, if you opt out of SS and choose the government retirement plan while in their employ, your contributions toward the government pension plan (other than the medicare portion) are not included in your federal taxable wages. For example, if your employee portion that you contribute to the government retirement plan is 6,000 and your gross federal wages are 75,000, your federal taxable income is 69,000 and not 75,000. That is not true of the private sector, the mandatory SS employee contribution is not a deduction from federal taxable wages. You pay income taxes based on the entire W-2 stated earnings of 75,000.

    The tax code is neither fair nor based in logic, if it were, your would only pay income taxes for SS benefits based on the portion the employer provided, in this case half.

    I haven't seen anyone on here who disagrees with you. I, like most others have said it was a bad idea. There should not be a tax on SS benefits, but this was done instead of fixing the program like they should have done.

    Mini Mart Magnate

    I am just here for my amusement. 

  • Lobstercatcher229Lobstercatcher229 Posts: 4,845 Captain
    navigator2 wrote: »
    The bolded portion is correct. However, if you opt out of SS and choose the government retirement plan while in their employ, your contributions toward the government pension plan (other than the medicare portion) are not included in your federal taxable wages. For example, if your employee portion that you contribute to the government retirement plan is 6,000 and your gross federal wages are 75,000, your federal taxable income is 69,000 and not 75,000. That is not true of the private sector, the mandatory SS employee contribution is not a deduction from federal taxable wages. You pay income taxes based on the entire W-2 stated earnings of 75,000.

    The tax code is neither fair nor based in logic, if it were, your would only pay income taxes for SS benefits based on the portion the employer provided, in this case half.

    You put it well. I am "shocked" that the government folks would write themselves a better deal with the retirement. Who would have thought it?
  • cadmancadman Home of the Gators Posts: 32,609 AG
    You put it well. I am "shocked" that the government folks would write themselves a better deal with the retirement. Who would have thought it?

    It may or may not be a better deal. But the reasoning behind the fed and some local and state governments opting out is that they would be using taxpayer dollars to pay into S.S. and still offer their own retirement. It would be using tax dollars to pay a tax. Basically just shifting tax dollars around.

    Mini Mart Magnate

    I am just here for my amusement. 

  • bswivbswiv Posts: 7,877 Admiral
    According to our accountant ( Called her this morning. ) the SS ( 7.65% ) that appears as withholding on a employees paycheck IS taxed as income to the employee.

    A tax on a tax in essence.

    Unless I completely misunderstood her.............
  • Big BatteryBig Battery Posts: 20,592 AG
    cadman wrote: »
    You are paying taxes on the income you earned. You did not pay taxes on the Social security tax. That would be the same as saying you pay taxes on the income tax withheld because you paid them on the income listed as gross wages. The tax is calculated on gross wages as is the income tax.

    Social Security is a tax withheld from your check. You can't tax taxes. You are paying tax on the oranges and not the apples.

    You are thinking of SS as an investment into a retirement account. It is not, it is a tax.

    Of course you did... the amount that you paid to SSI is NOT deducted from your income prior to calculating your tax due on income so the amount that you paid into SSI is taxed as income.
  • bswivbswiv Posts: 7,877 Admiral
    Of course you did... the amount that you paid to SSI is NOT deducted from your income prior to calculating your tax due on income so the amount that you paid into SSI is taxed as income.

    As you can see from my previous post I went and checked on this point with the accountant.

    I'm a bit unclear as to where CAD is coming from on this one. Seems quite clear that it is a tax on a tax in the first instance and a absurdity in the second.
  • Big BatteryBig Battery Posts: 20,592 AG
    bswiv wrote: »
    As you can see from my previous post I went and checked on this point with the accountant.

    I'm a bit unclear as to where CAD is coming from on this one. Seems quite clear that it is a tax on a tax in the first instance and a absurdity in the second.

    Yup.. Of course it is. It is comparable to saying that the money you spend on a TV wasnt taxed as income...
  • cadmancadman Home of the Gators Posts: 32,609 AG
    bswiv wrote: »
    As you can see from my previous post I went and checked on this point with the accountant.

    I'm a bit unclear as to where CAD is coming from on this one. Seems quite clear that it is a tax on a tax in the first instance and a absurdity in the second.

    Would you say you paid taxes on your income tax? It is calculated on gross wages same as SS and Medi. It is a tax calculated on gross wages, as I said above. You did not pay taxes on it since you can't pay taxes on taxes. If that was true, then you paid taxes on your income taxes. Does that sound logical.

    Your benefits have nothing to do with the amount of taxes paid. Your benefits is calculated on the highest 35 years of income. So the amount of taxes you paid is immaterial. It is a tax, not a deposit into a retirement account.

    I agreed that taxes should not be paid on the benefits. That was a move to lower benefits to higher wage earners without cutting their benefits which would have caused an uproar.

    I do not know how to explain it any clearer. There was no tax collected on your social security benefits you receive since they are not connected to the amount of tax you paid in. The tax is a tax and not a deposit into a retirement account.

    Mini Mart Magnate

    I am just here for my amusement. 

  • Big BatteryBig Battery Posts: 20,592 AG
    Yes, you paid taxes on your income taxes because you paid those taxes with AFTER tax income. If you make $100 and pay $10 in tax then the $10 in tax was roughly $11 before taxes, so you paid 10% tax on the money you paid your taxes with.
  • bswivbswiv Posts: 7,877 Admiral
    "None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it."

    Post #5 by CAD.

    What is a "social security deposit".....?
  • navigator2navigator2 Posts: 22,511 AG
    bswiv wrote: »
    "None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it."

    Post #5 by CAD.

    What is a "social security deposit".....?

    I believe Cadman's point is that SS is a tax and not a "true" investment into a retirement plan. Therefore it is not deductible from your federal earnings in computing your net taxable income. He is correct. However in my opinion SS is nothing more than a federally mandated scam Ponzi scheme in which you never have an investment balance in your own name. It is left up completely to the whims of whichever way the winds are blowing any particular day in congress. Government employees have a better deal. Employee contributions are deducted from your federally taxed gross income. Depending on whether or not you are in a defined benefit plan or defined contribution setup (and some government employees contribute zero to their retirement plans depending on the structure of the plan), their contributions are not taxed at all until they receive benefits.

    Bottom line? SS income recipients get double screwed up the **** when they pay income taxes upon retirement. Period.
    [SIGPIC][/SIGPIC]
  • grady30wagrady30wa Posts: 10,161 AG
    cadman wrote: »
    None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it.


    I notice you say that no "income tax" has ever been paid on your social security benefit, which is technically correct. But Social Security withholding, itself, is a tax...to the employer and the employee. It's not optional. Any time the government takes money from dollars earned against the will of the tax payer, it's a tax.
    Schadenfreude. November 8, 2016
  • cadmancadman Home of the Gators Posts: 32,609 AG
    bswiv wrote: »
    "None of your social security deposits are subject to income tax. No income tax has ever been paid on your social security benefit before you receive it."

    Post #5 by CAD.

    What is a "social security deposit".....?

    I misspoke calling it a deposit. My mistake, it is a tax.

    Mini Mart Magnate

    I am just here for my amusement. 

  • cadmancadman Home of the Gators Posts: 32,609 AG
    navigator2 wrote: »
    I believe Cadman's point is that SS is a tax and not a "true" investment into a retirement plan. Therefore it is not deductible from your federal earnings in computing your net taxable income. He is correct. However in my opinion SS is nothing more than a federally mandated scam Ponzi scheme in which you never have an investment balance in your own name. It is left up completely to the whims of whichever way the winds are blowing any particular day in congress.

    You are correct. Congress could change the law tomorrow and change your benefits or eliminate them.

    Mini Mart Magnate

    I am just here for my amusement. 

  • bswivbswiv Posts: 7,877 Admiral
    cadman wrote: »
    I misspoke calling it a deposit. My mistake, it is a tax.

    I assumed as much as you are one for being precise. Also makes the case for how we often end up at odd on here due to semantics rather than serious policy differences.
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