I am conceding nothing. There is a big difference in taxing all SS benefits for the 50 million people now receiving them, which would mean that two thirds of the people not paying taxes on them or abour 34 million, would be added to the rolls. I stated that some of the changes Obama might do is to increase taxes on the third who are already paying taxes on their benefits and perhaps add a few more who aren't. But there is no way Obama will commit political sucide by expanding taxes to 34 million recipients and their swelling numbers as the baby boomer cohort retires.
Why only make the upper income a little upset with you? Why not “go for gold” and make ALL of the SS benefit taxable?
Because of the numbers and econcomic status of those involved. Under current law, you will have to pay federal taxes on your benefits if you file a federal tax return as an "individual" and your total income is more than $25,000. If you file a joint return, you will have to pay taxes if you and your spouse have a total income that is more than $32,000. Two-thirds of the 50 million SS recipients do not pay taxes on their benefits under the current law. The monthly SS benefit for a worker is around $1100. How do you think it would play politically if you started taxing these folks?
Look at it this way, which is more likely: 1.) an actual cut in SS benefit amounts? or 2.) Simply taxing the SS benefit? Obviously, it is much easier to simply TAX the benefit.
False choice. There are many different things you could do to fund the program in the short term, including raising the worker and employer contributions from the current $6.2% each. That has not been raised since 1990.
Also, the lower income folks pay NO TAXES now. It would be fairly easy to simply treat SS benefits as income, without even impacting the “poor” -— if nothing else, the “floor” for “free” SS benefits could remain the same, or rise slightly.
80% of Americans pay more in payroll taxes than they do income taxes. What you want to do is tax the SS benefits for those already retired or disabled or are survivors. Now you seem to be changing your mind.
The “poor” might pay virtually NOTHING into SS, yet they are often likely to receive all of their benefits tax free!
That applies to a lot of people, about two-thirds of the recipients. And then there are the spousal benefits, which a spouse can receive without ever contributing to the system.
All CD interest, outside of a retirement account, would be taxable when earned.
Lots of people own CD’s but do not make enough income to pay taxes at all, on their total income!
1.) The “cap” on W-2 and Self Employment earnings that can be taxed, by Social Security, WILL BE REMOVED.
What on Earth would you expect from a Marxist President who PROMISED to “spread the wealth around”???
2.) The age for normal retirement, or full retirement benefits, will be increased. Yes, that has happened already, but it is going to happen again.
3.) The benefit itself will be subject to higher taxation levels, if not made 100% taxable. As stated earlier, just because the benefit would become fully taxable, does NOT mean that everyone will owe taxes on that benefit. The Standard Deductions are still there. The Exemptions are still there.
Also, keep in mind, that the formula, now, for taxation of SS benefits has “floors” of close to $25,000.00, which triggers a mathematical formula which dictates that 50% of your SS benefit, over $25,000 should be added to your taxable income.
Also, at about $34,000, 85% of your benefit, over $34,000 should be added to your taxable income, under current law.
(The above is for SINGLE individuals, the levels are about $32K and about $44K for married filing jointly)
Well, this does not tell the whole story.
The “taxation” formula ALREADY includes ALL forms of taxable income, pensions, IRA or retirement distributions, W-2 earnings, capital gains etc.
Also, the “taxation of SS benefits” formula also includes the municipal bond interest.
So, the current tax provisions are complicated, concerning the taxation of SS benefits, but let me put this to you another way:
THE RICH ALREADY PAY TAXES ON 85% OF THEIR BENEFITS!!
It would get rid of a complicated formula to simply make them pay taxes on 100% of the benefit.
Single taxpayer formula:
PENSION $26,000.00
IRA 8,000.00
SS 4,000.00 (half of 8,000, per formula)
Muni bond 2,000.00
In this case, 50% of the excess over $25K is taxable.
That would be $15k/2 or $7,500 even without the second table. We must adjust this figure, however, to show that only the amount between $25K and $34K is included in this figure. That would be $9K/2 or $4,500.
in this case, 85% of the excess over $34K is taxable.
That would be $6k X .85 = $5,100.
Over $25k but under $34K $4,500.00
Over $34K $6,000.00
The formula, in this case would indicate several things. First, up to $10,500 of SS can be “taxed”, from this calculation, but that is $2,500.00 more than was actually earned, in SS benefits. So the figure must be adjusted to the actual benefit amount. Then it must be adjusted again, since this person is allowed to have 15% of SS benefits “tax free” or not included in the formula.
So, this person, receiving a very SMALL SS benefit, would be taxed on roughly:
$8,000
85%
there is only a true “cap” on the 85% figure. Even if the formula dictates that 100% of SS is “taxable” the law currently states that only 85% of your benefit, as a maximum, can be added to your income for tax purposes.
I might have some minor errors in the calculations. My point is only that it is very easy for most everyone with any earnings at all to find themselves paying taxes on their SS benefits.
I firmly believe that the taxes on SS benefits will go up.
Talk to your insurance agent, lol.
Buy annuities. Deferred annuities avoid the tax.
Also, the “exclusion allowance” in an immediate annuity also helps avoid taxation.