My Financial Rant: How Social Security is TRIPLE taxation

self | Oct 5, 2022 | fwdude

[fwdude]

During my studies in tax accounting in college, I realized something that is seldom brought to the fore: the fact that the Social Security program entails a triple tax. Why, when so-called "fiscal conservatives" gain governmental power does this never get addressed?

I'll lay out the thesis here and then recommend some actions that future "Republican" or actual conservatives can implement, by the grace of God.

Social Security is a triple tax:
1. The tax itself, which is 6.2% of earned income up to an inflation adjusted limit, which is well above most average salaries. (An ancillary tax, medicare, which is based on the principles, adds another 1.45% tax confiscated and is not limited.)

2. The SS reduction is applied to already federally taxed money. This compounds the effect - you are paying tax on money you don't even receive.

3. Eventual benefits are taxed if there are substantial sources of other income, which many people must have to live. Up to 85% of social security benefits are added to taxable income based on total other income.

The most obvious solution is to attack #1, abolish social security altogether, or make it a wholly voluntary program. I know, a pipe dream, but most advances begin as dreams.

The next attack should be #2, exclude potentially taxable income that is extracted as social security tax. That would reduce a $100,000 salary income to $93,000, a substantial tax savings on $6,200 of income at 20+% marginal tax rate. If you want to help families and the economy, this should be a no brainer. Of course, you could argue that the tax structure already factors in this reduction with dependent deductions, but at least make it explicit. We already make this apparent with cafeteria health plans on paycheck stubs.

The third point is the hardest to gain traction. It goes against the "tax the rich" narrative that is ubiquitous in Washington and leftist circles, a virtual third rail. Social Security retirement benefits to people who have been forced, without their consent, even working for private employers, to pay involuntary tribute to a system with a set of promised future benefits should NEVER have to pay taxes on these benefits. At least if you do number 2, don't do number 3. It would be more logical to exempt social security contributions from federal tax and then tax the benefit proceeds. But even that doesn't happen, and the drumbeat is to exclude "the rich" from any benefits whatsoever in an increasingly unviable Ponzi scheme which hasn't been truly solvent for decades.

[minnesota_bound]

If you have stock and cash some of it you get less social security money as a penalty!

[lizma2]

BKMK