Summary of Provisions That Would Change the Social Security Program
Description of Proposed Provisions:
Provisions Affecting Taxation of Benefits
Estimates based on the intermediate assumptions of
the 2021 Trustees Report
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|
Change from current law [percent of payroll] |
Shortfall eliminated | |||||
|---|---|---|---|---|---|---|
|
Long-range actuarial balance |
Annual balance in 75th year |
Long-range actuarial balance |
Annual balance in 75th year |
|||
| Current law shortfall in long-range actuarial balance is 3.54 percent of payroll and in annual balance for the 75th year is 4.34 percent of payroll. | ||||||
| H2 |
Starting in 2022, tax Social Security benefits in a manner similar to private
pension income. Phase out the lower-income thresholds during 2022-2041.
graph | table | pdf-graph | pdf-table | memo (Warshawsky) |
0.21 | 0.17 | 6% | 4% | |
| H3 |
Starting in 2023, modify personal income tax by: (a) establishing two-brackets with
marginal rates of 15 and 27 percent separated at $51,000 (CPI indexed); (b) creating
a non-refundable credit for low-income tax filers age 65 and older; and (c) treating
capital gains as regular income. Tax all Social Security benefits at the applicable
marginal rate (15 or 27 percent) less 7.5 percent, with 60 percent of this revenue
going to OASDI and 40 percent going to HI.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center 2010) |
-0.04 | -0.09 | -1% | -2% | |
| H4 |
Increase the threshold for taxation of OASDI benefits to $50,000 for single filers
and $100,000 for joint filers starting in 2023. Taxation of benefits revenues transferred
to the Hospital Insurance (HI) Trust Fund would be the same as if the current-law
computation applied.
graph | table | pdf-graph | pdf-table | memo (Larson 2015) | memo (Larson 2014) |
-0.11 | -0.01 | -3% | -0% | |
| H5 |
Beginning in 2028, for single/head-of-household/married-filing-separate taxpayers with
MAGI of $250,000 or more and joint filers with MAGI of $500,000 or more, include up to
the remaining 15 percent of Social Security benefits in taxable income (increased from
up to 85 percent of benefits taxable under current law). In subsequent years, update these
thresholds for growth in wages (AWI). Revenue from this provision would be credited to
the Social Security trust funds. Current law taxation of up to 85 percent of Social Security
benefits would remain unchanged.
graph | table | pdf-graph | pdf-table | memo (Bipartisan Policy Center October 2016) | memo (Bipartisan Policy Center June 2016) |
0.01 | 0.01 | 0% | 0% | |
| H6 |
Eliminate federal income taxation of OASDI benefits that is credited to the
OASI and DI Trust Funds for 2054 and later. Phase out OASDI taxation of benefits
by increasing relevant "income" thresholds from 2045 through 2053 as follows,
for single/joint tax filers: (a) 2045 = $32,500/$65,000; (b) 2046 = $40,000/$80,000;
(c) 2047 = $47,500/$95,000; (d) 2048 = $55,000/$110,000; (e) 2049 = $62,500/$125,000;
(f) 2050 = $70,000/$140,000; (g) 2051 = $77,500/$155,000; (h) 2052 = $85,000/$170,000;
and (i) 2053 = $92,500/$185,000. Taxation of benefits revenues for the Hospital
Insurance (HI) Trust Fund would be maintained at the same level as if the
current-law computation applied.
graph | table | pdf-graph | pdf-table | memo (Johnson 2016) |
-0.53 | -0.98 | -15% | -23% | |
| H7 |
Replace the current-law thresholds for federal income taxation of OASDI benefits
with a single set of thresholds at $50,000 for single filers and $100,000 for joint
filers for taxation of up to 85 percent of OASDI benefits, effective for tax year
2023. These thresholds would be fixed and not indexed to price inflation or average
wage increase. Reallocate a portion of revenue from taxation of OASDI benefits to
the HI Trust Fund such that the HI Trust Fund would be in the same position as if
the current-law computation (in the absence of this provision) applied. The net
amount of revenue from taxing OASDI benefits, after the allocation to HI, would
be allocated to the combined Social Security Trust Fund.
graph | table | pdf-graph | pdf-table | memo (Larson, Blumenthal, Van Hollen September 2019) | memo (Larson, Blumenthal, Van Hollen January 2019) | memo (Larson 2017) |
-0.17 | -0.01 | -5% | -0% | |