AMAC In The Media / Finance / Opinion / Politics / Press Releases / Social Security / Taxes

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

Social SecurityWASHINGTON, 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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James R. Greeson
2 months 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
2 months 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
2 months 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
2 months 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
2 months 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.

PaulE
2 months ago
Reply to  Michelle

Your husband is a retired LEO who receives a pension from the state. SS rules have been quite clear for a number of decades that anyone receiving such a state pension would be dinged in benefits when it came to collecting from SS. Thus the small amount of money each month. He should be very happy that he is receiving that state pension, as it is far larger than anything he would have received from just SS alone. Your standard of living in retirement would be far less, if you just had to rely on a SS check.

Howard MacKinnon
2 months 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.

Vicki
2 months ago

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

PaulE
2 months ago
Reply to  Vicki

Obama transferred money out of SS (further depleting the so-called SS trust, which is a story for another day) to put money into SSDI. The SSDI program was running out of funds (lots of people were filing for SSDI claims (Illegally) when their state unemployment ran out…ah the great Obama economy…NOT!), so he just siphoned off from money from SS to keep SSDI operational rather than address the rampant, illegal SSFI filings.

Regina Powell
2 months ago

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

COLVENA ZOLLER
2 months ago
Reply to  Regina Powell

Wonder if we can make claims to the taxes paid Again. From today goin backwards

Paul A
2 months 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
2 months 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
2 months 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
2 months ago

This was one of the taxes that Biden sponsored

DBM
2 months 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.

PaulE
2 months ago
Reply to  DBM

The politicians lied back then just as they lie now. Rule number 1: If a politician is talking, you can bet he is lying to one degree or another.

stan hafers
2 months ago

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

Denis J. Meyers
2 months 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.

Phil B
2 months ago

Who votes for a guy that promises higher taxes. Just saying

Kat
2 months ago

I remember seeing that video where he told the small crowd he was talking to that he was definitely going to raise taxes…they just sat there like they didn’t hear what he said. I was like…whats wrong with you people?? Didn’t you just hear the man say he was gonna raise your taxes WHEN he gets in office?? He knew then the fix was in. SHAMEFUL

Nancy Crandall
2 months ago

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

J D Jones
2 months 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.

Ed J
2 months ago
Reply to  J D Jones

I understand your situation because I have been there. However, let’s separate the Social Security issue from the Medicare issue. I would like to specifically address the Medicare issue.

When I reached the specified full retirement age for Social Security benefits, I was required to sign up for Medicare Part A for which there is NO monthly premium required. Medicare Part A pertains to hospitalization and such. Medicare Part B pertains to doctors, etc.

Since I was still working past my retirement age and had medical insurance through my employer, I was not required to sign up for Part B until such time as I lost my employer’s insurance coverage. At that time, I was required to sign up for Part B which does have a monthly premium. Honestly, that monthly premium is CHEAP, considering what doctors charge for office visits, lab work, surgeries, etc.

Subsequent to this, my wife and I investigated Medicare Advantage Plans, often called Medicare Part C. Part C replaces Parts A and B.  Parts A and B basically entail cost sharing. This cost sharing can get very, very expensive for those who develop severe health issues over time. With Part C coverage, there is no need to buy a Medicare Supplement plan. Medicare Supplement plans can eat you alive financially if you stick with the traditional Part A and Part B plans.

I opted for a Medicare Advantage Plan offered by one of the health insurance companies in our area. My plan includes both vision coverage and drug coverage (Part D).  I still have to pay the monthly premium that Medicare has associated with Part B. But I pay no additional premium for my Plan C coverage. I also opted to pay an additional $16 a month for comprehensive dental coverage. There are modest copays to see a doctor, get transported by an ambulance, and to cover all surgeries I may need. The best part of this plan is the annual cap. For what would be defined as the Part A and Part B services provided under the Part C plan, my annual out of pocket maximum is $3,400.

Last year I had both my eyes operated on for cataract surgery and lens replacement. The list price for this surgery for each eye was about $8,000. I paid a modest copay of $250 per eye under my Plan C. This is quite a bargain in today’s medical cost world.

David Hanson
2 months 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
2 months 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.

Linda Hofer
2 months ago
Reply to  allan bickford

I agree. We are punished for working hard our whole lives.

Roy Ruprecht
2 months ago

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

Charles
2 months ago
Reply to  Roy Ruprecht

Because the railroad retirement is in lieu of social security.

Belinda Macks
2 months ago
Reply to  Roy Ruprecht

The railroad workers worked for the government (like the post office). When they began working, it was essential to the economy in the United States. There were no airplanes to transport troops or goods. Therefore, a railroad job was a federal job; was not a state entity.

Phil C
2 months ago
Reply to  Roy Ruprecht

An answer to your Railroad Retirement question,
Social security was patterned after railroad retirement.
Railroad retirement was in place first and Social security came along afterwards so those that work for the railroad are in the old system.

Phyllis Majors
2 months ago
Reply to  Roy Ruprecht

Railroad retirement is in lieu of social security I guess the two are similar in nature

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