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The Fight Goes on to Eliminate Income Taxes on Social Security and Railroad Retirement Benefits

Posted on Friday, February 12, 2021
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by AMAC, John Grimaldi
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60 Comments
Social Security

WASHINGTON, DC, Feb 12 – “We’re not giving up on our efforts to eliminate the unfair income tax on Social Security benefits.  The Senior Citizens Tax Elimination Act is being reintroduced and the Association of Mature American Citizens [AMAC] will be doing what it takes to encourage lawmakers to support the measure,” says Bob Carlstrom, president of AMAC Action, the association’s senior advocacy affiliate.

The original Social Security and tier 1 railroad retirement benefits were specifically exempted from income taxes when they were created in the mid 1930s.  “After all, workers pay for them with taxes that are taken out of their paychecks to begin with.  To tax retired seniors a second time is plain and simple a money grab.”

Carlstrom notes that AMAC’s founder, the late Dan Weber, was especially keen on seeing this particular piece of legislation become the law.  As he put it, “Every year, millions of seniors become eligible for either Social Security or tier I railroad retirement benefits. After working for decades, being involuntarily taxed on their hard-earned income to fund these federal programs, some seniors are forced to pay income tax on the benefits they withdraw from the Social Security System. Taxing the very benefits created from taxed earnings is completely nonsensical and diminishes the retirement benefits seniors have been promised. Seniors deserve to reap the full benefits of their career-long contributions to Social Security and the Railroad Retirement Plan.”

It’s important to note that if your benefits are your only source of income, they likely will not be subject to income taxes.  But, if you are working at a full time or part time job, if you have self-employment income, if you are receiving distributions from an IRA or 401k plan, or if you are collecting dividends from investments, you are required to file a tax return.  And, Carlstrom explains, it’s not just income from those sources that are taxed; a hefty portion of your retirement benefits get taxed as well.

To be more specific, he says, the tax is levied on a combination of your outside income and half of your retirement benefits.

AMAC Foundation Executive Director Gerald Hafer notes in this regard, “The 1983 and 1993 amendments to the Social Security Act were expected to affect less than 10% of the senior population, but now snare half of all senior taxpayers. It’s only going to increase without inflation adjustments.  Moreover, beneficiaries are being taxed at significant levels which they can ill afford because the thresholds (base amounts) for taxing benefits have not been changed in decades.  Not indexing or adjusting the threshold ignores the constant dollar cumulative rate of inflation increase on what the threshold should now be — almost a 160% increase. The result—up to 85% of one’s Social Security benefits being taxed based on decades old thresholds–is financially painful to many seniors surviving on limited incomes.

“The point is, not many individuals and married couples are able to survive on Social Security and Railroad Retirement benefits alone in this day and age; most of them need to supplement their benefit income in order to get by.  And they need to keep their Social Security and railroad benefits intact.”

About AMAC Action

AMAC Action is a 501(c)(4) nonprofit advocacy organization created to assist Association of Mature American Citizens [AMAC] members with grassroots participation on Capitol Hill and at the local level through its advocacy programs.

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Howard MacKinnon
Howard MacKinnon
3 years ago

We, the people, need to take our country back. How obvious can it get that the democrats in power have forgotten they work for US!! They send Billions of OUR money to other countries when that money should be distributed back to us, especially now in our time of need.

Regina Powell
Regina Powell
3 years ago

Taxing Social Security should be illegal since that money was already taxed when it was earned. This is DOUBLE TAXATION!!

M. Charlton
M. Charlton
2 years ago

oh — by the way, I’m 76 yrs old & need to work until I drop dead in order to supplement my hard earned money!

M. Charlton
M. Charlton
2 years ago

I felt I had to pay a company (based in California) to protect me from the IRS; I was shocked to discover that my social security was being taxed at an 85% rate! All they did was work some arrangement in which the amount I owe is being held on a sort of forbearance. No thorough explanation was provided in either verbal or written form. I live in fear of what’s coming next!

James R. Greeson
James R. Greeson
3 years ago

Keep up the fight-the whole concept was all about easy money for the greedy government to get. They are also trying to tax my military compensation benefit for service related medical issues. No offence, I had to fight them just to get it a few years ago, when all along they never made it known that I could be collecting it for many years in the past. I am an old vet, only made $299.00 a month in my last 7 mos active service in Vietnam.

Michael D Sadler
Michael D Sadler
3 years ago

I agree, Boo-Hoo we make too much money. The tax I pay on social security is unfair. The $230 a month I pay for Part B is unfair. The $60 a month I still pay for Medicare at 71 is unfair. And yal PaulE, I agree it’s not gona get any better and more likely will get worse for us in the lower middle class. But, it’s worth the effort to support AMAC and try to make a change. Not trying guarantees we won’t. And who knows, some of this might get tacked to a bill and get passed as a carry on. Not likely but stranger things have happened in congress. Press on AMAC….

Ed J
Ed J
3 years ago

The bottom line regarding Social Security is really very simple. All Social Security benefits should be completely exempt from all Federal, State and Local taxation of any kind – forever! Social Security is not a gratuitous gift bestowed on us by the Federal Government, it is an earned benefit bought and paid for by the FICA deductions from our paychecks over our entire working lives and on which we have already paid income taxes. More fundamentally, it represents a Social Contract between our Federal Government and We, the People! It’s time we demand that the Federal Government fully honor this contract with We, the People.

Lynn
Lynn
3 years ago

George Harrison had it right in his song “Tax Man”. It’s double taxation, grossly unfair.

While we’re at it…Why do folks have to withdraw 5% of IRA or other such income if we don’t intend to use it or don’t need to use it thankfully?

Michelle
Michelle
3 years ago

It is a down right shame that we as retired people are subject on tax on our Social Security. My husband is also penalized because he was a Police Officer icier for 30 years. He receives a very small amount of money each month. This also should be looked into and very much appreciated by Police Officers. Thank you for bringing these new stories to light, without them we would not see what is going on with our money in this government.

Vicki
Vicki
3 years ago

And let’s not forget how Obama took 5 billion from our #SS. Where it went I’m sure to Iran Taliban

Paul A
Paul A
3 years ago

The method for calculating taxable SS actually creates potential additional tax burdens for those drawing SS and taking withdrawals from a pre-tax IRA. It really seems unfair to me that if you take a withdrawal from a pre-tax IRA, not only do you pay tax on that IRA withdrawal, but it will likely also increase the taxable portion of SS earnings, causing a doubling effect on total taxable earnings.
As a very simplified example, if you take a $10,000 IRA withdrawal, you may see a doubling effect up to a total $20,000 increase in taxable income. If you are in a 20% tax bracket, your income tax burden for the year may increase by $4,000 as a result of taking that $10,000 withdrawal. Therefore, it’s effectively like being taxed twice on the withdrawal.

Additionally, in states where SS is taxable for state income taxes, you may see a similar effect. So, if your effective rate is 5%, your state income tax burden may increase by $1,000 as a result of taking that $10,000 withdrawal.

In summary from the example, the $10,000 withdrawal from a pre-tax IRA may result in only $5,000 available for your use after paying $4,000 in FIT and $1,000 in State Income Taxes.

Gerald kamm
Gerald kamm
3 years ago

Income tax was part of the deceptive creation of the fraudulent Fed Reserve, ( a non- governmental body ) to make citizens responsible for the interest on the national debt to a cabal of international bankers.

Corinne Miller
Corinne Miller
3 years ago

Question on taxes for 2020. I have not been filing due to low income? Where can I find rulings on that?

ROBERT B WHITFIELD
ROBERT B WHITFIELD
3 years ago

This was one of the taxes that Biden sponsored

DBM
DBM
3 years ago

When the federal income tax was first established, the politicians promised that 1) only the very wealthy would have to pay and 2) it would never exceed 5% of your income.

stan hafers
stan hafers
3 years ago

I believe in this but let us know what elected people are working on our behalf

Denis J. Meyers
Denis J. Meyers
3 years ago

Trouble is, President Biden, as a Senator, voted twice to impose taxes on Social Security. Once to tax 50% and once to raise that to 85%. The man never saw a tax he didn’t like. He ran on the platform of raising taxes. He stood before prospective voters and promised “I’m going to raise your taxes.” When Harris becomes President soon, she will follow in his footsteps. Prepare yourselves for the highest taxes in history.

Nancy Crandall
Nancy Crandall
3 years ago

Just a clarification my social security benefits are taxed at 85 percent.
I appreciate your efforts on stopping this taxation

J D Jones
J D Jones
3 years ago

Let me provide an additional scenario that makes the situation even more ludicrous.
1. 72 year old person in good health continuing to work full or part time.
2. You must draw SS and will certainly be taxed at the 85% threshold on the money you are drawing from the pot you provided from previous taxation.
3. You are still having to pay SS on the current income while you continue to work and you will never recover that money if you are currently maxed out.
4. You are in good health and take no medication. You are required to have Medicare Part A and must take Medicare parts B and D or you will be penalized. The premium for part B and D is based on MAGI which is increased by SS payments, any investment income and any retirement account RMD’s or retirement account conversions from Traditional to Roth. You will pay a major penalty for certain income levels if you file jointly with a spouse or even try to file separately because of the adjustment in tax brackets.
5. The above scenario means you are taxed on SS payments that you paid in previously, you are still paying a SS payment/tax because you still choose to work and you are also getting a tax surcharge on Medicare premiums for something you don’t even use.

Congress is filled with numerous persons over the age of 70 and they are not being penalized for still working. If Congress had to be under the same stupid system it would be changed immediately.

David Hanson
David Hanson
3 years ago

Railroad Retirement is the same as Social Security only the worker and railroad pays more into the fund with the hope/expectation they would get more out when they retire. If you support not taxing Social Security, it would be illogical for you to be against Railroad Retirement people getting the same benefit. A supervisor working for a railroad gets a retirement plan and pays taxes on that money so Roy Ruprecht, here is your answer.

allan bickford
allan bickford
3 years ago

Also eliminate the “government pension windfall” provision. Even though I paid into social security my entire working life, my social security payment is a whole $273 a month. My gasoline bill is more than that.

Roy Ruprecht
Roy Ruprecht
3 years ago

What is the railroad retirement and why should it brand exempt? My retirement is not. I pay taxes on my retirement.

Chuck
Chuck
3 years ago

As long as there are politicians hungry for power and money, the “little people” will always be exploited.

Betty C Rader
Betty C Rader
3 years ago

We can thank China Biden for taxing our SS benefits. It was his bill that did it.

Stephen H Farra
Stephen H Farra
3 years ago

Good point on the “double taxation” issue! They take out “payroll taxes” all of your life, and then in retirement, they want to take out income taxes on the same money, as it slowly starts coming back to you!

And then, they have the nerve to speak of Social Security payments as “an entitlement.” The money we now get from the government is NOT an “entitlement”, but A CONTRACTUAL OBLIGATION on the government’s part – they take out money all of our working lives, based on the promise of a modest, but regular income flow in retirement. They need to KEEP their PROMISE.

They take our money all of our working lives, and then have the gall to refer to the income flow as “an entitlement.” Once again, it’s not “an entitlement” but a contractual obligation!.

Let’s get it right! -shf

Virginia
Virginia
3 years ago

This year because I dared to continue to work and draw SS thinking I could get myself out if debt faster so I could retire, I will have to pay almost $2000 additional taxes for 2020, so pretty much they will be getting back their ” stimulus” money. I’m guessing there are quite a few of us in the same boat. The money taken from us and contributed by employers should have been in some interest bearing account so SS earnings wouldn’t be taxed. Too logical and too fair for us.

Jan charckon
Jan charckon
3 years ago

Yes I think it’s ridiculous to tax S.S. benefits. We’ve already paid taxes on it when we were working. The government is always trying to tax us more than once on the money we have made.

Fixer
Fixer
3 years ago

Actually only half of the money that is paid into Social Security comes from the employee’s after-tax money. The other half comes from the employer. Therefore, it seems to me that at most only 50% should be taxable not 85%.

Edd
Edd
3 years ago

This will NEVER happen. Are you forgetting, Joe Biden voted to tax social security in the first place, then later voted to raise the percentage of social security that is taxed. Will never happen with that bird in office.

A J Foster
A J Foster
3 years ago

The first 50% of SS was taxed under Johnson and the second 85% was under Clinton. As a projection of things to come it is reasonable to assume that we will never be able to pay our debt and China is busily working toward that becoming a fact. I don’t have an answer since we are pushing our slide into bankruptcy by giving to people with no intention of producing anything or any useful work. The people who have built this nation have elected people to manage their affairs who have no intention of serving them and only want their pay and authority to rule as kings.

Disruptive Element
Disruptive Element
3 years ago

Silly me, I thought that saving a over a lifetime to be able to produce a nice older age income so as not to be a burden to society, there would be some freedom from the grip of the IRS. Not so, it is worse, The IRA RMD insures the taxation of SS as it pushes your income level up, thus higher taxes. Making deals with the devil it is.

Daniel A Burger
Daniel A Burger
3 years ago

This is an email going around today. Is it true?

The stimulus package to be paid for by who, you ask? Read on.
    Social Security Tax Reviewed:
 
Prior to 1983, social security payments were not taxable.
 
In 1983, Joe Biden voted in favor of taxing 50% of social security payments – and it passed.
 
In 1993, Joe Biden doubled down and was the deciding vote in raising the percentage taxed on social security from 50% to 85%.
 
Joe Biden is not a friend to working folks – and certainly not to retirees.
 
His voting record on social security over the years is one slap in the face to retirees after another.
 
Now he wants to tax our 401k’s and IRA’s (it’s on page 78 of the Dems’ platform) and he also wants to introduce a 3% annual tax on our homes.
 
The record of Joe Biden shows he never misses an opportunity to raise a tax or introduce a tax to hurt the middle class and retirees.
 
Keep this one going. The more people that see this the better. The media will not put it out.

Don Poole
Don Poole
3 years ago

I have always felt that taxing Soc. Sec. benefits was off base. If I work and get paid, then tax that income, after all it is income from work. Soc.Sec. is not income, but the results of an “investment” of time through this government managed retirement fund, at least that’s the way I see it. I am self-employed and also work part time. I have a retirement from my career. I have an IRA as well. Proceeds from those items get taxed, after the fact. Knowing the government is strapped for funds because of the deficit, one should not be surprised they will tax anyone and anything they can to
play the CYA game. Another side of this is my contention that flat tax income tax is a proper way to apply taxes equitably across the board. If you make 50 million, you pay a flat rate. If you make 5 thousand you pay the same rate. The misnomer that the poor will be hid hardest belies the fact that if you know what your taxes will be up front, you live your life with that concept as part of the mix. A percentage of one amount or another may sound bad, but think about how sales tax works. You know you will pay 8%, so you grocery shop and what ever with the understanding that it is part of the cost. If I work and get paid “x” dollars and know that a certain percent will be gone off the top, then I live within the means. If I want more, I work more. If I want a bigger paycheck, I do more work or change jobs, what ever it takes for me to have what I want. The tax issue becomes mute. the other side of this is to get out of and stay out of debt, something the government has never seen as a proper approach. (Balanced budget????”) I have also heard the argument that this would damage charitable giving. I don’t give because it means a tax benefit, I give because some one needs it. If we are giving for tax purposes, we live a lie regarding cheerful giving. Another thought of mine is when you reach a certain age……say 75, you are completely removed from any income tax….federal or state, period. No way that will happen, but we can dream. Enough for now. Blessings to all.

Charles Preston
Charles Preston
3 years ago

Good to know information. Is there pending legislation? What are the bill numbers?

Geeg Gross
Geeg Gross
3 years ago

I totally agree with this push to eliminate income taxes on Social Security and Railroad Pensions payments for the reason stated. Talk about a shot to the economy. Seniors need that extra cash flow benefit especially to help pay for their very expensive medications.

PaulE
PaulE
3 years ago

While this may be a noble goal for AMAC to continue to pursue, here are the realities that will prevent your success in the endeavor:

1) Our national debt has zoomed past $30 trillion dollars and shows no signs of slowing in the rate we continue to spend obscene amounts of money foolishly. Covid-19 has provided the federal government, and especially the Democrats, with a means to leverage spending obscene amounts of tax dollars on a long laundry list of pet progressive projects, that never would have had a chance in normal times. Look at the spending bills already in the Congressional pipe for this year alone. We are looking at adding upwards of $10 trillion more in debt in just 2021, if all the proposed Congressional legislation the Democrats have geared up passes.

2) The Democrats do NOT care about providing tax relief to seniors. We are NOT one of their core voting constituencies, so we have no real value in their eyes. If anything, the senior population of this country is looked upon as one of the major sources of re-distributed tax revenue to help fund their pet progressive spending projects.

3) Most seniors are generally less agreeable to the policies initiatives of the Democrats, because we generally see those policies for what they really are when you’ve stripped away all the flowery rhetoric. So, if anything, we as a group are much more likely to be on the Democrats’ list of groups to fiscally punish than assist in any way.

Bottom line: The Democrats generally view the senior population, rightly or wrongly, as one of the cash cows to be milked in order to provide them with the means to shower their actual voting base with the myriad of “free stuff” and other goodies that they have promised. So while it would be terrific if the taxation of Social Security benefits could be permanently repealed or suspended, the hard reality is given our exploding national debt levels, our out of control spending (largely droiven by Democrat efforts) and the party in power, the realistic chances of success are zero. That of course doesn’t mean AMAC shouldn’t pursue its goal. It just means AMAC should have a realistic expectation of its chances for success and NOT create a sense of false hope within its members that tax relief is a real possibility near-term.

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