TSCL is wary of a Social Security reform option that would increase the taxes that seniors pay even more by treating Social Security benefits like pensions.
Alexandria, VA (PRWEB) April 15, 2014
A new poll released today by The Senior Citizens League (TSCL) suggests rapid growth in the number of seniors who pay taxes on their Social Security benefits. The TSCL poll indicates that as many as two-thirds (66%) paid taxes on their Social Security benefits last year. “This number represents considerable growth over the past decade,” says TSCL Chairman, Ed Cates. According to the Congressional Budget Office, 39%, or 16.9 million Social Security beneficiaries, were affected by the taxation of Social Security benefits in 2005.
The growth is due to several factors. “Not only are there more Social Security beneficiaries who are working longer, but unlike income brackets, the income thresholds subjecting Social Security benefits to taxation are fixed,” Cates say. “That means a growing number of middle and even lower-income seniors are paying the tax on benefits,” he points out.
Up to 85% of Social Security benefits can be included in taxable income of taxpayers whose “provisional income” exceeds income thresholds. “Provisional income” includes all income, including certain tax-exempt income and one-half of Social Security benefits. The tax affects individuals with provisional incomes of $25,000 and joint filers with provisional incomes of $32,000. “But if those income thresholds had been indexed to inflation like regular income brackets since the tax took effect, it would affect far fewer seniors — individuals with incomes of $52,673 and higher and joint files with incomes of $68,165 and higher,” Cates says.
The taxes go to shore up the Social Security and Medicare trust funds. “But seniors view it as double taxation,” Cates says. TSCL is wary of a Social Security reform option that would increase the taxes that seniors pay even more by treating Social Security benefits like pensions. Distributions from defined benefit plans are taxable, except for the portion that represents the employee’s “basis” or, after-tax contributions to the plan. Under the proposal, once the recipient has recovered his or her entire basis tax-free, all subsequent pension distributions are fully taxed.
“This reform would have the biggest impact on people with the lowest income,” Cates asserts. According to the Congressional Budget Office, people with income below $44,000, including some who depend solely on Social Security, would see their taxes increase by the greatest amount. The CBO said this “would be equivalent to reducing benefits.”
“TSCL favors tax reform that would adjust the tax on Social Security by indexing the income thresholds like tax brackets and pay for it by requiring high earners to pay their fair share of Social Security taxes,” Cates says.
TSCL shares poll results with Members of Congress. To participate in polls, visit TSCL’s website at http://www.SeniorsLeague.org.
With about 1 million supporters, The Senior Citizens League is one of the nation's largest nonpartisan seniors groups. Located just outside Washington, D.C., its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. The Senior Citizens League is a proud affiliate of TREA The Enlisted Association. Please visit http://www.SeniorsLeague.org or call 1-800-333-8725 for more information.