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Who Taxed Social Security?

Discussion in 'General Politics' started by Dale, Sep 19, 2021.

  1. Dale

    Dale Senior Veteran Supporter

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    Strategists for the Democratic Party believe that the Democrats should bask in glory forever because the Democrats created Social Security.

    Where I live, reactionaries have had no trouble turning that around. They say that the Democrats are the ones who taxed Social Security benefits. I wish I had a dollar for every time I’ve seen this claim.

    What are the facts? Originally, Social Security benefits were not taxed. When did that change?

    “This changed for the first time with the passage of the 1983 Amendments to the Social Security Act. Beginning in 1984, a portion of Social Security benefits have been subject to federal income taxes.”

    1983? Then Ronald Reagan was President! The last time I checked, RR was a Republican.

    Congress passed and President Reagan signed into law the 1983 Amendments.”

    Moreover, only nine members of the Senate voted against it, so the bill was passed in a bipartisan vote.

    “On the evening of March 23rd, the Senate passed its version of the bill by a vote of 88 to 9.”

    Source of quotes:
    Social Security History
    This is the website of the Social Security Administration.
     
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  2. 1rreducibly Complex

    1rreducibly Complex Newbie

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    Amendments to social security under Reagan are irrelevant to SS being broken.

    Social security is underfunded for the same reasons american infrastructure is underfunded. All programs operated by the US government wind up significantly underfunded eventually. The trend has nothing to do with Reagan.
     
    Last edited: Sep 19, 2021
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  3. zippy2006

    zippy2006 Dragonsworn

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    The younger, childless generations are taxing social security.
     
  4. SkyWriting

    SkyWriting The Librarian Supporter

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    It shouldn't be structured so the children pay for the old fogies. The government should be in the stock market, investing in America.
     
  5. Albion

    Albion Facilitator

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    Actually, the overview given in the Original Post here missed a lot of facts. The taxing of SS benefits has been the work of both parties in Congress, and it isn't something that one party supported vigorously while the other one sternly fought against it.

    First, the main reason for taxing the benefits is the rising cost to the system of what's paid out. Had the benefit structure remained as it was set up to be originally, taxing the benefits would seem outrageous. But over the years, Congress--with support from both parties--extended the benefits to more and more people, including ones that had paid nothing or almost nothing into the so-called SS Trust Fund.

    Second, Congress has "borrowed" from the SS Trust Fund over the years in order to finance other programs, leaving only IOUs behind.

    We've all heard in recent years that the SS money is about to run into the red. Yes, and that's because of the give-aways, the sweeteners, that Congress stuck onto the system over the years and the raids by Congress upon the SS money paid in through FICA withholdings.

    More Republicans were hesitant about that than Democrats, but neither side is in the clear on this issue. And the taxing of benefits has been done in stages. First a portion of the benefits received were made subject to federal taxes, then a higher percentage, then the age for eligibility for retirement benefits was raised, and so on.
     
  6. Albion

    Albion Facilitator

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    ;) Socialist programs are praised as fair and even Christian so long as the idea of re-distributing income doesn't strike too close to home. But when it does...then the idea of investing in private companies and betting on commerce, market conditions, supply and demand, and so on, suddenly becomes attractive.
     
  7. Dale

    Dale Senior Veteran Supporter

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    I didn't say anything about Social Security being underfunded, so you're just changing the subject.
     
  8. Dale

    Dale Senior Veteran Supporter

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    Albion: "But over the years, Congress--with support from both parties--extended the benefits to more and more people, including ones that had paid nothing or almost nothing into the so-called SS Trust Fund.

    Second, Congress has "borrowed" from the SS Trust Fund over the years in order to finance other programs, leaving only IOUs behind."


    I thoroughly agree with this.
     
  9. Dale

    Dale Senior Veteran Supporter

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    My experience is that most of the people who spend a lot of energy attacking “socialist programs” don’t seem to understand what they are attacking.

    Where I live, a while back we had people who were angry—literally angry—when they found out that the government is giving cell phones to homeless people. It looks like part of the problem is that they seem to think that the homeless are being given iPhones that cost almost a thousand dollars. The reality is that the phones given to the homeless are worth about $40.

    With a phone, a homeless person can call their family and tell them they are still alive. It also makes it possible to apply for a job. How do you apply for a job when you don’t have an address or a phone number? So it could help to get a homeless person out of the ranks of the homeless or out of the ranks of the homeless and jobless.
     
  10. miamited

    miamited Ted Supporter

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    Hi skywriting,

    While that may be a debatable point...Government programs have never been, "Ok, let's take some money from workers and put it in the bank and wait 50 years to pay it back with the same dollars that the beneficiary paid in". SS, medicare/medicaid are all programs that, when the money is paid out, comes from the funds that are currently being paid in. I honestly doubt that you could ever get our government, or likely any government, to sit with a huge pot of money in the bank just to hold for x number of years until it's paid out again in benefits.

    God bless,
    Ted
     
  11. 1rreducibly Complex

    1rreducibly Complex Newbie

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    If you want.

    I can tell you exactly why and how social security is broken.

    And how it has absolutely nothing to do with Reagan or republicans as your 1st post appears to imply.

    Double taxation is common and normalized in government. Its not worth mentioning.
     
  12. miamited

    miamited Ted Supporter

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    Hi, IC,

    I have to agree that whether or not the SS system is broken isn't really the point of this thread. You could start your own if that's what you'd like to discuss. The question of this thread is merely who, and I'm sure it's referring to which political party, passed the bill that began taxing SS benefits.

    We've yet to see whether or not the SS system will be permanently or irreparably broken. Likely as we get further along in this 'higher outflows than inflows', then there will be adjustments in one or both of those conditions. Congress, as it has often in the past, may raise the ceiling on income taxable for SS. Just this year Congress raised the ceiling by some $5,100. Then they may also change the rate and add a few percentage points to that. Today both employer and employee pay 6.2% each. For the top earner making $142,800, that equates to some $8,853. that are paid in along with that same amount being paid in by that person's employer. That could be raised to 6.3 or so without feeling a lot of pain, but a bit higher rate might cause some backlash.

    Consider that just this year the U.S. lost about 600,000 people who will not be drawing SS, above the normal attrition rate. That would have two consequences. Those who were retired when they died will no longer be drawing benefits. Those who were still working will no longer be paying in the system. Right now, statistics show that more people who were drawing likely died than those who were still paying in, since the death rate for covid is higher in the older populations.

    While that is certainly a morbid thought, it does go to show that what SS looks like in 10 years, when most are claiming that changes will have to be made, is yet up in the air. Personally, I think that there will likely be a combination of changes to continue to fund SS. The ceiling income will be raised and likely the percentage will go up a few basis points.

    We might also see some cuts in 'who' gets SS benefits. I happen to agree with @Albion who stated above that we do seem to have lost sight of what exactly the SS program was supposed to do. There are a lot of people drawing SS benefits that aren't receiving those benefits because of retirement. SS disability has put a large draw on the SS funds that I don't think was necessarily supposed to be a part of the original plan. So, if the government is going to expand the scope of SS and 'who' receives benefits, then it would logically reason that more funding would be necessary. We'll see.

    However, I'm fairly confident that the system will not just implode and disappear for lack of funds. Americans have been paying SS taxes now for some 90 years and even if the demographics of the nation get 'old age' top heavy, there's still a lot of money coming into the coffers. That's not going to just one day stop. We'll see.

    Look people have been tolling the death knell of SS for a loooooong time...yet it's still there and still doing what it's supposed to do. Yes, it's had to be adjusted repeatedly over the last few decades. SS changes have been about as common as postage stamp rate changes. Every couple of years adjustments need to be made.

    God bless,
    Ted
     
  13. The Barbarian

    The Barbarian Crabby Old White Guy

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    The reason Reagan decided to tax Social Security was for practical reasons. Yes, it was Reagan who sent the proposal to Congress.

    Here's why:
    The earlier Reagan tax cuts were massive cuts for those in top brackets, with significant, but smaller cuts for middle-class Americans. This was in the days when people still believed in the Laffer Curve, that predicted tax cuts would produce massive increases in tax revenue from increased business investment.

    Unfortunately, that never happened. So Reagan was facing a huge deficit. His solution was to increase taxes for the middle class, but to call them "revenue enhancements"

    The income tax rate was down since Reagan took office eight years before, but increases in payroll and other federal-sponsored "revenue enhancements" meant the average worker took home a lesser paycheck when Reagan left office than under his predecessor, Jimmy Carter.
    Everything you think you know about Reagan is wrong - SMU

    One of those "enhancements" was to tax Social Security income. Another was to renege on the promises to our veterans by taking away some of their retirement pay.

    But they weren't "tax increases"; they were "revenue enhancements."
     
  14. The Barbarian

    The Barbarian Crabby Old White Guy

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    Yeah. In 1978, my boss told me that I shouldn't count on Social Security, because it would be gone by the time I retired.

    Republicans hated it, and always wanted to kill it. But like Obamacare, it was just too popular to risk doing so. It would have killed the republican party.
     
  15. SkyWriting

    SkyWriting The Librarian Supporter

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    I have both paid and received welfare money. "In the middle of it" is pretty close to home on many other levels, for me. I'm not seeing why privatization changes.
     
  16. miamited

    miamited Ted Supporter

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    Hi @The Barbarian

    Right. You likely came up in the same generation I did. I'm 66 and I'll get my first SS check next month. There have long been those who have made strong statements foretelling the demise of SS. However, as it is with most government programs that continue on, it gets tweeked every couple of years to bring it back in line and it continues on.

    As far as I've read, SS is not going to be worthless by 2033, but will not be able to make the payments that it makes if all things remain the same. In 2020 the receipts just barely covered the expenses. I think the receipts were $1.06B and the expenses were $1.05B. It is estimated that 2020 may be t he last year that it will be in that position. Without some changes, expenses, from now on, will likely exceed receipts. However, the pandemic may make some changes. A lot of the people dying are older Americans who are receiving and not paying in any longer. That may make some small change...I don't know.

    But my point is that even as it stands now, the federal coffers will still continue to take in that $1.06B and that will still be handed out in some manner. So, it's not like the program is going to just go bankrupt and nobody will ever get anything in the future. However, by making small changes, as Congress has done regularly over the last 30 years at least, there's a good chance that the SS program can once again be tweeked back to solvency.

    God bless,
    Ted
     
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