It’s Time to Open Our Eyes to Social Security’s Stealth Tax
Social Security is one of many things the government adjusts annually for inflation. This year, recipients saw the biggest cost-of-living-adjustment (COLA) in decades because of last year’s record-high inflation. According to USA Today, one thing that has never been adjusted for inflation is the federal income threshold to determine who pays taxes on Social Security benefits. Each year more and more seniors are reaching those low thresholds and are having to pay taxes on their benefits. That’s why it’s often referred to as a “stealth tax.”
Social Security Taxes
Years ago, very few people had to pay taxes on Social Security benefits. The article points out that in 1984 less than one in 10 beneficiaries’ benefits were taxed. Today that number has grown to more than half of all beneficiaries.
It’s easy to see why when you look at how Social Security is taxed. Depending on your so-called provisional income, up to 85 percent of your Social Security benefits can be taxed. Provisional income is calculated using your gross income, any tax-free interest you received, and 50 percent of your Social Security benefits.
If you are single and this total is less than $25,000, or if you file jointly and it’s less than $32,000, then none of your Social Security is federally taxed. However, if your provisional income is between $25,000 and $34,000 for single filers or $32,000 and $44,000 for joint filers, then up to half your Social Security is taxed. And up to 85 percent is taxed for anything above $34,000 for single filers and $44,000 for joint filers.
These thresholds have remained the same for decades and senior advocates say it’s time for an increase. That’s because, with income thresholds so low, a large proportion of beneficiaries owe taxes on Social Security every year. Essentially, reducing retirees’ income and negating any cost-of-living increases.
Senior citizen advocates are calling for raising the income thresholds to $73,000 for individuals and $93,200 for joint filers. At those levels, fewer Social Security beneficiaries would owe taxes and would be able to keep more money in their pockets. Money needed for basic life necessities, such as food and gas, and housing that have increased substantially due to rapid inflation.
Social Security Expansion Act
Social Security income thresholds aren’t the only things that need an overhaul. The Seniors Trust thinks the entire program needs to be revamped to ensure its solvency. We believe the best way to save Social Security is the Social Security Expansion Act. This landmark bill buttresses the long-term solvency of Social Security by expanding benefits for seniors — not cutting them. It would expand Social Security benefits by $200 per month across-the-board and create a fairer cost-of-living adjustment that takes into account the unique expenses facing seniors.
If you agree that this is a viable means of solving Social Security’s solvency issues, please show your support by signing our petition to Congress and join us as we work to improve the lives of senior citizens.
