Almost 50% of You Paid Taxes on Your Social Security Benefits;
At Least 60 Large Companies Paid No Taxes at All
Rick Delaney, TSCL Chairman
The new tax law appears to have had little to no effect on relieving the taxation of the Social Security benefits received by retired taxpayers. Almost half of all retiree households, about 46% of respondents in TSCL’s 2019 Senior Survey, report that they paid taxes on a portion of their Social Security benefits for the 2018 tax year. That’s virtually the same that was reported for the 2017 Senior Survey, before the new tax law went into effect. Meanwhile, at least 60 large profitable corporations, including Amazon, Chevron, and insulin drug maker Eli Lilly, reported they didn’t owe any taxes in 2018, compared to previous years, as a result of the 2017 Tax Cuts and Jobs Act.
This came as no big surprise to TSCL. The controversial 2017 tax law lowered the corporate tax rate to from 35% to 21% among a number of other cuts. On the other hand, no changes were made to the taxation of Social Security benefits, stacking the system against Social Security recipients. Even retirees with very modest incomes can be subject to a tax on a portion of their Social Security benefits. A growing number of retirees are affected by the taxation of Social Security benefits, because the income thresholds are fixed, and not adjusted annually, like income tax brackets. In 1984 when the taxation of Social Security benefits began, less than 10 percent of Social Security recipients paid tax on benefits. Now it’s about five times that. The Senior Citizens League is working to enact legislation that would raise the income thresholds that subject Social Security benefits to taxation.
From 50 percent to 85 percent of the Social Security benefits can be subject to taxation, depending on income. Single filers with incomes of $25,000 or more, and joint filers with incomes of $32,000 or more are affected. The tax is determined by adding nontaxable interest income to the adjusted gross income, and one half of Social Security benefits.
A new Social Security bill in Congress, the Social Security 2100 Act (H.R 860 and S. 269), would eliminate this tax for millions of older taxpayers, by making substantial changes to the income thresholds. The bill would raise the current income thresholds for taxation of Social Security benefits to $50,000 for single filers and $100,000 for joint filers, effective for tax year 2020. TSCL Senior Surveys have found that lifting the income thresholds that subject Social Security benefits to taxation is strongly supported by older taxpayers. The bill would make up for the loss of revenue, by other payroll tax changes.
Did you pay tax on your Social Security benefits? Please participate in our 2019 Social Security Survey, visit www.SeniorsLeague.org.
Sources: “Corporate Tax Avoidance Remains Rampant Under New Tax Law,” ITEP Institute On Taxation And Economic Policy, April 2019.