Social
security benefits first became taxable in 1983.
The law was
relatively straightforward:
·
Half
of one’s social security became taxable as adjusted gross income exceeded
o
$32,000
for marrieds filing jointly,
o
$25,000
for everyone else, except for
o
Marrieds
filing separately, whose threshold was zero (-0-)
Clearly the
tax law frowned on married social security recipients filing separately.
The Senate
Finance Committee Report commented on why any social security was being taxed at
all:
… by taxing social security benefits and appropriating these revenues to the appropriate trust funds, the financial solvency of the social security trust funds will be strengthened.”
Uh, sure.
In 1993
Congress laid a second grid on top of the 1983 law:
·
85%
of one’s social security as adjusted gross income exceeded
o
$44,000
for marrieds filing jointly
o
$34,000
for everyone else, except for
o
Marrieds
filing separately, whose threshold remained at zero (-0-)
Depending on
where one is income-wise, part of one’s social security can be taxed at 50% and
another part at 85%. Make enough and a clawback kicks-in: all your social
security will be taxable at 85%.
Seems a bit
complicated for a tax provision that snags ordinary people.
So in 1983,
if you were married, filing joint and your income was less than $32 grand, your
social security was not taxed.
I was
curious: what is the equivalent of $32,000 of 1983 dollars in 2019?
Approximately
$82 grand.
Wow!
I was also
curious: how have the income thresholds for social security changed over
three-plus decades?
Here are the
thresholds for 2018:
·
$32,000/$25,000
·
$44,000/$34,000
They have
not changed at all.
Meanwhile you
need almost three 2019 dollars to equal one dollar from 1983.
So let me
get this right.
IRA
deductions are indexed for inflation. Gift taxes are indexed for inflation. The
income thresholds for the new 20% passthrough deduction are indexed for
inflation.
But the tax
on social security is not.
What a nice
gimmick. Even if you started out below the tax threshold, inflation over time would
probably put you above the tax threshold.
The cynicism
from our politicians is stunning.
