Did the Biden administration push to tax Social Security?
A proposal in the House by Democrats called Social Security 2100: A Sacred Trust hopes to gain bipartisan support and shore up Social Security benefits.
During the presidential campaign then-candidate Biden made proposals to shore up Social Security benefits. Due to budget shortfalls over the years the trust funds that support the program are at risk of being depleted in 13 years according to the Social Security Administration’s latest estimates.
During the campaign there were misleading posts on Facebook attacking Biden's record as a senator for increasing taxes on Social Security, and his campaign tax proposals claiming he would tax retirement accounts. Now there is a proposal in the House being reintroduced which hopes to garner bipartisan support, shore up the program and increase benefits.
Social Security taxes for high-incomes
The Social Security Administration announced an historic cost-of-living adjustment (COLA) to benefits in October of 5.9 percent. This was the result of higher-than-normal inflation as the US rebounds from the pandemic-induced economic crisis which affected the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) upon which the COLA is calculated.
At the same time the new Social Security taxable maximum on incomes for those contributing was increased but at a lower level than the previous two years. The contribution and benefit base, also known as the taxable maximum, is based on the National Average Wage Index. The payroll tax for contributions to Social Security will now apply to the first $147,000 of workers’ net earnings in 2022.
Here are the major ways the Social Security 2100 Act would change Americans’ benefits:— MarketWatch (@MarketWatch) October 27, 2021
- An across-the-board benefit bump
- Switch to CPI-E, an index tied to the costs of goods and services older Americans use
- Offer caregiver credits https://t.co/BeKQWTHnjX
Social Security 2100: A Sacred Trust would reapply Social Security taxes on wages at $400,000 and up, leaving a “donut hole” for earnings in between that threshold and the $147,000 taxable maximum. This is what President Biden had proposed when campaigning thus keeping his promise not to raise taxes on those earning less than $400,000.
When campaigning President Biden had also proposed equalizing the tax benefits of traditional retirement accounts, such as IRA and 401(k) contributions, providing a refundable tax credit in place of traditional deductibility. So far such a measure hasn’t been mooted in the Social Security 2100 proposal.
Reduced taxes for some beneficiaries
The Social Security 2100: A Sacred Trust would raise thresholds above which income including Social Security is taxed. Currently individual beneficiaries with income over $25,000 and couples with income over $32,000 pay income taxes. The Social Security 2100: A Sacred Trust calls for raising the threshold to $35,000 for individuals and $50,000 for couples.
The Social Security 2100 act aims to save the agency before it resorts to benefit cuts. Can it work? @kenziesigalos reports. #investinyou (in partnership with @acorns) https://t.co/afLuytuqy8 pic.twitter.com/I0oBxl1SpI— CNBC (@CNBC) December 13, 2020
President Biden’s campaign proposals didn’t mention the threshold thus making fewer recipients liable to pay tax on their benefits, but during the 2020 campaign he was falsely held singularly responsible for Social Security benefits being taxed in the first place on Facebook posts. Prior to 1983 Social Security benefits were not taxed but that year Congress passed a bipartisan bill that taxed 50 percent of benefits above a certain threshold.
Then-Senator Biden was one of the 88 senators that voted in favor of the measure to help keep the Social Security trust fund for retirement benefits from running out of money. Again in 1993 then-Senator Biden voted in favor of creating a second higher-tier above which 85 percent of Social Security benefits could be taxed. Currently about half of Social Security recipients pay no federal income tax on their benefits.
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