Star Member Warren Stupidity (42,553 posts)
Yet another middle class screwjob: taxation of social security benefits.
Prior to 1983 social security benefits were not taxed. As part of the 1983 Amendments to the Social Security Act, otherwise known as The Dawn of The Raw Deal, benefits were taxed based on all income, including 50% of your SS benefits, with benefit taxation starting at 32,000 for a joint return. In 1983 this screw-job was palatable mostly because 32,000 was a reasonably comfortable income level for a retired couple.
In 2015, because we are in the Raw Deal era that started in 1983, the same $32,000 threshold applies. It has never been inflation adjusted. If it had been it would be around 76,000 dollars.
Note that the maximum monthly benefit for two people in 2015 is around 64,000. 32,000 of that (the 50% rule above) meets the benefit taxation threshold. Every dollar you earn would result in taxation of your SS benefits. The first 12,000 you earn would result in half of your SS benefits being subject to taxation. If your income outside of SS exceeds 12,000 85% of your SS income is taxable. And by "earn" I mean "any source of income, including otherwise non-taxable income". For example, "tax free" bonds, or more screw-jobberly, your 401K savings.
Who do taxable benefits hurt? Not the rich, that's for sure, they are already hurting so bad that congress is lining up to repeal the estate tax once again, and thankfully the middle class will help subsidize this with their taxable SS benefits.
Dummie... I was around a then. SS was in going to be in dire straights. The dems came up with the law and passed it thru congress. Reagan signed it. At the time, the dems sold it as making SS solvent for, and I quote "at least a 100 years".
So here we are a 100 years later and it is going broke... again. Instead of reforming it to fix the problem once and for all, every little suggestion the reps make the dems go off the deep end. So typically it will have to get in dire straights again before the dems will want to fix it.
The easy reform, the really easy painless reform, is to let SS have a conservative mix of stocks and bonds in the market. Pols don't want to do that because that would show just how much the government really spends. If SS was to get a conservative average of 6 percent the program would be fully funded with minimum pain. Instead of that, the dems will piddle fart around as usual until they figure out there are a large number of baby boomers on SS and will vote their ass out of office.
Taxes are going to go up for EVERYONE dummie. It is just a matter of when. Not enough rich folks. Mark my words. It will be either that or they will have to cut welfare and medicaid. Either way you are screwed.
