SS

A bill has been introduced to remove tax on social security benefits. Prior to 1984 social secuity benefits were not taxed but that year the law changed to start taxing, if income was above a certain amount. This meant the lower income people would not be effected. For those who were taxed it would mean double taxation because the employer contributions were made with after tax dollars. The new law is presented as a tax reduction and is called the You Earned It You Keep It Act. The first question that comes up is why is Congresswomen Angie Craig, a democrat, introducing a bill to lower taxes. The answer is that it increases the tax on those putting money into the system. Currently people pay a 6.2% social security tax on the first $168,000 of earned income. This bill will tax all income effective in 2032 and it would take money from the rich and give it to the middle income group. The lower half of all social security receipients would not be effected since they don't pay taxes. If the bill passes then a person earning $500,000 would see their contribution increase from $10,400 per year to $31,000. When this person retires with $500,000 of income from all sources they would not have to pay tax on their $46,000 social security benefit which would save them about $18,000 in taxes. They would put in an extra $21,000 to save $18,000 at retirement. If the person earned $1 million they would pay in an extra $52,000 to save that $18,000. If the person earned $10,000,000 they would pay in an extra $520,000 to get back $18,000. This is one way to close the income gap and help to save social security which in 2033 will begin to reduce benefits to retirees. It will not require a lot of new paperwork since the system is already in place.