TAXING SOCIAL SECURITY

 

Moron Trump now proposes eliminating federal income tax on Social Security (and, I assume, Railroad Retirement) benefits. 

FYI – the taxability of up to 50% of Social Security benefits (and Social Security equivalent Railroad Retirement benefits) was introduced under Reagan and began in 1984. The taxability was increased to up to 85% in the Omnibus Budget Reconciliation Act in 1993.

Like his proposal to eliminate tax on tips, this is just another attempt to buy votes.

I do believe that the current method of determining taxable Social Security is wrong.  Under the current method whether your Social Security, or Railroad Retirement, benefits are taxed depends on the amount of the other income reported on your 1040-SR – and this includes otherwise tax-exempt interest from investments in municipal bonds and municipal bond funds. For every additional $100 of income, you could be taxed on $185.  So, for a person in the 22% bracket the additional income could be taxed at 41% - more than the current maximum 37% bracket.

Here is how I think Social Security should be taxed – from my book THE TAX CODE MUST BE DESTROYED -

“Social Security and equivalent Railroad Retirement benefits would be taxed the same as regular employer pensions are currently taxed.  There would be no special calculation, and the taxable benefit would no longer be affected by increases or decreases in other items of income.  Taxpayer employee contributions would be recovered by amortizing them over the taxpayer’s life using the, what else, ‘Simplified Method’ to determine the taxable amount of the benefits received.”  

Your thoughts?

TTFN