Social Security Benefits Taxation: Issues And Present Status

Abstract

<span style="font-family: Times New Roman; font-size: small;"> </span><p style="margin: 0in 0.5in 0pt; text-align: justify; mso-pagination: none;" class="MsoBodyText"><span style="color: black; font-size: 10pt; mso-themecolor: text1;"><span style="font-family: Times New Roman;">Taxation of Social Security benefits was introduced in 1983 as part of a general restructuring of Social Security.<span style="mso-spacerun: yes;"> </span>As part of the 1993 Omnibus Budget Reconciliation Act, taxation of benefits was revised and expanded.<span style="mso-spacerun: yes;"> </span>Inclusion of social security benefits as part of taxable income is determined by comparing a modification of adjusted gross income and half of social security benefits to threshold amounts established in each tax law. <span style="mso-spacerun: yes;"> </span>Unlike most amounts used to determine tax, the thresholds were not subject to indexation or revision. <span style="mso-spacerun: yes;"> </span>This paper examines the current state of social security taxation in light of personal income changes, social security benefit revisions and federal income tax rate and bracket modifications that have taken place over the fourteen years since the last revision in taxation of benefits.</span></span></p><span style="font-family: Times New Roman; font-size: small;"> </span>