New Bill Would Exclude Social Security From Income Tax

News May 22, 2023 at 02:45 PM
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New legislation, H.R. 3206, the Senior Citizens Tax Elimination Act, would repeal the inclusion in gross income of Social Security benefits.

Social Security advocates criticized the bill, saying it would hurt the solvency of the Social Security and Medicare trust funds.

Under current law, up to 85% of a retiree's Social Security benefits are taxed, depending on income. This tax revenue is deposited to the trust funds.

The bill specifies that taxes cannot be raised to replace this revenue.

The bill would "erode the solvency of Social Security and Medicare while masquerading as a 'senior tax cut,'" Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, told ThinkAdvisor via email on Monday.

"The Senior Citizens League is on the record as supporting adjustments in the income threshold that subject benefits to taxation or even abolishing the tax on Social Security as long as the revenues can be replaced by other revenues," but H.R. 3206, introduced by Rep. Thomas Massie, R-Ky., "would not do that," Johnson said.

The bill would put the funding currently covered by income taxes on benefits "into doubt," Johnson said. "Rather than a straightforward statement [in the bill] that the money [to replace the tax revenue] would come out of the Treasury, the legislation conditions that on any money not otherwise appropriated for each fiscal year."

Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare, said in another email Monday that "while we support providing seniors relief on their obligation to pay taxes on their Social Security benefit, we don't support using general revenue to replace Social Security funds forgone as a result of offering such relief. Using general revenue instead of payroll taxes to pay for tax relief undermines the earned right nature of Social Security benefits."

The National Committee, Adcock said, "has not taken a position on H.R. 3206, but we are likely to support the Social Security legislation Rep. John Larson is about to introduce which will include a provision to raise the taxation threshold for Social Security Benefits."

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