My research may be faulty, but the taxes collected on social security income were supposed to be put into the social security trust fund to keep it solvent when it was signed into law in 1984. Instead of taxing high wage earners paychecks they chose to put that burden on low income retirees receiving benefits. Reaganomics, aka the “trickle down theory“. We received the “down” but never received the “trickle”. BTW; the current President voted yes to that debacle.If you do that, you break the concept of Social Security. It was meant to roughly model a retirement system where what you put in bears at least some resemblance to the benefits you receive. That's what made it popular enough to pass Congress in the 1930s. Your solution would turn it into more of a welfare program in which the high income earners subsidize the poor (and in the case of Social Security, the middle class). That's not a change I can support.
I do think that taxing the Social Security benefits that working elderly people receive was not a good move when it was passed and remains bad policy today. It was a money grab by Congress to help reduce our heavily debt burdened public fisc. There are other ways to balance the budget than by taxing Social Security benefits. I'd start by looking for things we can cut out of the budget, but since it seems every program has some constituency for it Congress can't find the collective will to do that.
Yep, the average worker doesn’t realize this until the “jack in the box” pops up in front of them.I agree with you, but I do think that the upper income level needs to be better adjusted for inflation.
I agree with you here as well. I do understand why they did it, but it still was not a good move. It punishes both those who continue to work after full retirement age and those who invested wisely for their retirement. It can be quite a sticker shock for some retirees.
My research may be faulty, but the taxes collected on social security income were supposed to be put into the social security trust fund...
I could not agree with you more. When I look at the total SS tax I paid over the years and compare that same figure contributed to my retirement account during the same time period, the SS benefit is 8-10 times less annually over a 10 year period. These numbers are estimates of course.Many Americans are under the belief that the "trust fund" is made up of investments that grow over time, like retirement plans because FDR and the Democratic congress at the time sold it to the public as a retirement plan, not welfare. But the reality is that the trust fund is invested in special funds that only the U.S. Treasury can buy. In other words, the excess amount the government once generated over the amount needed to pay current benefits is loaned to the U.S. Treasury via bonds and notes (which have very low interest rates, like other government bonds) to fund other government operations. And where does the money needed to repay those bonds and notes ultimately come from? Federal taxes, of course, which will have to go up sooner or later because since 2021 the Social Security programs no longer run a surplus; they are running a deficit and are starting to have to call in those bonds. By 2034 (at current projections) all those outstanding notes and bonds will have all been redeemed, making the Social Security system insolvent. At that point there will either need be some significant cuts to benefits paid out and/or significant increase in taxes to cover the gap. Congress has known this for at least 20 years and has never truly addressed the problem. And the longer Congress waits, the more drastic the cuts to benefits/increase to taxes will have to be to balance the books. Social Security has always been run as more of a pay as you go operation, not as a real investment fund, which is the root of the problem. The younger generations in particular are going to be the ones paying the most for the bad choices Congress has made over the years with Social Security.