Social Security insolvency is a complex issue. Politicians address it slowly. Social Security changes face political backlash, especially regarding benefit taxes. The Social Security taxation rules haven’t changed in decades. With the time to address the program’s issues fast approaching, it is also time to update the tax rules to fit the modern world. CNBC’s Lorie Konish reports on the possible changes to the Social Security tax, and how it may battle insolvency.
The Social Security Tax
The Social Security tax can be confusing for some to understand. Our benefits are only sometimes taxed. It depends on our other income. The government determines your combined income, adding your total gross income and half your total benefit together. If that amount equals more than the specific limits set on individual and couple tax filers, then they pay Social Security tax.
Single filers making more than $34,000 pay taxes up to 85 percent of their benefit. Couples pay up to that taxed amount if they make more than $44,000.
What Needs to Change?
Many argue for no benefit taxes at all. Taxes sting but they serve a purpose, mostly making sure programs like the Social Security Administration (SSA) can operate. What needs to change is how our benefits are taxed. Those combined income limits are less than the average incomes for most of the middle class.
This old tax code results in less of a benefit for everyone. There is no one answer, but we can start by updating the tax code to better reflect today’s wages and economy.
The Social Security tax needs refreshing. To fight insolvency, the whole program needs prioritizing by our leadership. Join the Council for Retirement Security in their fight against insolvency and help protect the program today.