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Lawmakers connected House passing fund measure
As Congress was approving President Trump's "big, beauteous bill" connected Thursday, the Social Security Administration touted the authorities by stating that the authorities "eliminates national income taxes connected Social Security benefits for astir beneficiaries."
That claim, which echoes previous promises by Mr. Trump to region taxes connected Social Security, whitethorn person travel arsenic invited quality for the millions of older and disabled radical who beryllium connected the programme for income. So does the measure deliver? Not entirely.
In a press release, SSA said that the taxation and spending package, which the president is acceptable to motion into instrumentality connected Friday, "ensures that astir 90% of Social Security beneficiaries volition nary longer wage national income taxes connected their benefits."
That fig draws connected a June analysis by the White House's Council of Economic Advisers that said 88% of seniors — oregon 51.4 cardinal radical — connected Social Security volition wage nary taxation connected their payments nether the measurement due to the fact that their deductions would transcend their taxable benefits.
The measure "includes the largest taxation interruption successful American past for our nation's seniors," CEA said, adding that "the deductions guarantee that seniors who earned their Social Security done years of hard enactment get much wealth backmost successful their pockets."
Yet portion it's existent that the measure offers caller taxation alleviation for immoderate radical connected Social Security, it is misleading to suggest that the measurement does distant with taxes connected Social Security benefits, argumentation experts told CBS MoneyWatch. Rather, the measure offers alleviation by creating a caller "bonus" taxation deduction for beneficiaries.
"While the deduction does supply immoderate alleviation for seniors, it's acold from wholly repealing the taxation connected their benefits," Garrett Watson, manager of argumentation investigation astatine the Tax Foundation, a Washington D.C., deliberation tank, told the Associated Press this week up of Congress approving the bill.
The Social Security Administration did not respond to a petition for comment. The White House declined to comment.
How does the "big, beauteous bill" interaction Social Security?
The measure doesn't destruct taxes connected Social Security, but alternatively introduces a impermanent deduction that beneficiaries tin assertion to little their national income tax. Notably, that deduction applies to each of a senior's income — not conscionable to Social Security benefits.
Bobby Kogan, elder manager of national fund argumentation astatine the Center for American Progress, a nonpartisan deliberation vessel successful Washington, D.C., told CBS MoneyWatch the measure doesn't alteration the taxation of Social Security benefits. Eliminating taxes connected Social Security nether the measure was intolerable due to the fact that of a legislature regularisation (dubbed the Byrd Rule after precocious West Virginia Sen. Robert Byrd) that limits what the Senate tin see successful a reconciliation measure similar the Republican fund measure.
What the measure does bash is supply a impermanent taxation deduction of up to $6,000 for seniors aged 65 and older. The taxation interruption is disposable to radical with an adjusted gross incomes of $75,000 oregon little and $150,000 oregon little for couples filing jointly. The deduction is acceptable to expire successful astatine the extremity of 2028.
"Each spouse tin instrumentality the deduction, for a full of $12,000, if some are 65-plus," AARP explains successful its analysis of the fund bill. The deduction phases retired for radical who gain supra those amounts.
Social Security recipients nether 65 and radical supra the specified income thresholds are ineligible to assertion the caller taxation deduction. It besides won't payment the galore low-income seniors who already wage nary national income taxation due to the fact that they gain excessively little.
"Boosting the magnitude that you get to constitute disconnected erstwhile you already get to constitute disconnected everything does not assistance you astatine all," Kogan said.
The Tax Foundation, a nonpartisan argumentation probe group, said successful a June report that exempting Social Security benefits from taxation would not alteration the after-tax income for the bottommost 20% of taxpayers, noting that "those taxpayers are already exempt from taxation connected their Social Security benefits."
The biggest beneficiaries of the measure volition beryllium higher-income seniors, said Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, which focuses connected Social Security education.
"The radical who payment by explanation person to beryllium richer, and radical who payment the astir are the richest people," Kogan added.
More unit connected Social Security?
Providing a impermanent taxation deduction is apt to assistance immoderate Social Security recipients, but it could besides worsen the status program's fragile fiscal state, Kogan said. Social Security is connected way to deplete its spot money by 2034 if Congress does not instrumentality action.
"We already person a occupation of not capable wealth going into the spot fund. This measure makes adjacent little wealth spell into the spot fund," helium said.
The Penn Wharton Budget Model, a University of Pennsylvania deliberation vessel that studies fiscal issues, estimates that eliminating income taxes connected Social Security benefits would little national gross by $1.5 trillion implicit 10 years and summation the national indebtedness by 7% by 2054.
As the statement continues implicit however to enactment up Social Security portion offering taxation alleviation to older Americans, 1 happening is clear, and possibly politically unpalatable: cutting benefits. According to a AARP-funded survey from the National Academy of Social Insurance released successful January, 85% of Americans deliberation benefits should not beryllium reduced, oregon that they should beryllium increased, adjacent if it means raising taxes connected immoderate oregon each Americans.
"Virtually each Americans privation their Social Security benefits to beryllium preserved and are consenting to bash what it takes to guarantee the programme continues to supply meaningful enactment for aboriginal generations," said AARP Chief Public Policy Officer Deb Whitman successful a statement aft the survey was released.
The Associated Press contributed to this report.
Mary Cunningham is simply a newsman for CBS MoneyWatch. Before joining the concern and concern vertical, she worked astatine "60 Minutes," CBSNews.com and CBS News 24/7 arsenic portion of the CBS News Associate Program.
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