Social Security Taxation Question Pushes Action on “Boost Bill” Into 2020
By Shannon Benton, Executive Director
Social Security benefit “boost” legislation under consideration in the House not only would boost benefits by about $70 per month on average, it also includes a provision that would allow senior taxpayers to keep more of their money. Under current law, up to 50% of Social Security benefits are taxable when the sum of the recipients’ modified adjusted gross income, plus half of Social Security benefits, exceeds $32,000 for a couple filing jointly, or $25,000 for a single taxpayer. As much as 85% of Social Security benefits may be taxable when the income is above $44,000 for joint filers, or $34,000 single filers. Revenues from the taxation of Social Security benefits flow to the Social Security and Medicare Trust Funds, and go towards the financing of benefits.
The Social Security 2100 Act (H.R. 860), introduced by Representative John Larson and currently under consideration in the House, would replace the two-tier income threshold system with a single set of thresholds — $100,000 for joint filers and $50,000 for single filers. The bill would subject as much as 85% of Social Security benefits to taxation as under current legislation.
The bill would provide critical savings to millions of older taxpayers with modest incomes below the new threshold amounts. But, as frequently can happen when legislation is under deliberation, progress on the bill was recently put on hold. Lawmakers are considering how the revenues to the Social Security and Medicare Trust Fund would be allocated, and from where replacement revenues lost due to the tax cut would come.
As originally introduced, the bill tied all income taxes paid on Social Security benefits to the Social Security Trust Fund, and none to the Medicare Trust Fund. Instead, the bill specified that revenues destined for the Medicare Trust Fund would come from general revenues, in an amount equal to those that the trust fund was otherwise estimated to receive from the taxation of Social Security benefits.
However, a modification to the bill is under consideration that would provide a portion of the income taxes collected on Social Security benefits to the Medicare Trust Fund in the same manner and amount as current law. That modification, however, would have a big impact on Social Security’s cash flow in the earlier years. According to the Joint Committee on Taxation, the change would lower the total amount of revenues going into the Social Security Trust Fund by $431 billion over the 2020-2029 period, and would not prevent Social Security from becoming insolvent by 2036.
Can the legislation be fixed in order to prevent this from happening? TSCL strongly believes that the cost of providing relief for the taxation of Social Security benefits can be worked out, if there’s a will in Congress to make it happen. Provisions can be tweaked and phased in to make the budget math work. Your input at this point is critical. We urge you to write or call your Representative and ask him or her to help move this legislation that would boost your Social Security benefits, provide a slightly higher COLA, and provide a modest tax cut for millions of retirees with modest benefits.
In the months ahead, The Senior Citizens League will continue to advocate for these and other policy solutions that would strengthen and enhance Social Security benefits for current and future beneficiaries. For progress updates, follow The Senior Citizens League on Twitter.