A bill that would eliminate income taxes on Social Security benefits has been introduced in the House of Representatives, according to ThinkAdvisor.
Rep. Thomas Massie (R-Ky.) proposed the Senior Citizens Tax Elimination Act, H.R. 1040 recently with 29 Republican co-sponsors. The measure, if passed, would fulfill a promise made by President Trump during the presidential campaign.
Massie noted that until 1984, Social Security benefits were exempt from the federal income tax. Congress then enacted legislation to tax a portion of those benefits, with the share gradually increasing as a person’s income rose above a specified income threshold.
“Although seniors have already paid tax on their Social Security contributions via the payroll tax, they are still required to list these benefits as taxable income on their tax returns,” said Massie. “This is simply a way for Congress to obtain more revenue for the federal government at the expense of seniors who have already paid into Social Security. My bill would exempt Social Security retirement benefits from taxation and boost the retirement income of millions of older Americans.”
Massie’s legislation would repeal the inclusion of Social Security benefits in gross income for federal tax purposes while also ending the inclusion of tier I railroad retirement benefits in gross income.
“As this legislation takes effect, seniors will notice their tax liability is significantly reduced and will no longer deal with the ‘double tax’ on their federally earned benefits,” he said.
The Senior Citizens League (TCSL) estimates that the average senior household receiving Social Security benefits currently pays approximately $7,022 annually and would save about $3,000 per year under the Massie bill. TCSL added that eliminating taxes on Social Security benefits would also help retirees regain buying power they’ve lost due to inadequate cost of living adjustments.
CNBC reports that a study by the Penn Wharton Budget Model, a nonpartisan, research-based project at the University of Pennsylvania, found that scrapping the tax on Social Security benefits may reduce U.S. government revenues by $1.5 trillion over 10 years and increase the federal debt by 7% by 2054.
Under the proposed legislation, the Treasury would appropriate funds from other sources to maintain benefits.
Senators Roger Marshall and Marsha Blackburn have also introduced legislation to lower the tax burden on Social Security benefits for seniors.
As a previous blog post noted, any changes to Social Security would require at least 60 Senate votes, and with Republicans holding a 53-47 majority, some Democratic support would be needed.
That could be a hurdle, given the fact that a non-partisan budget group predicted that the proposal would make Social Security insolvent in six years. The analysis by US Budget Watch 2024, a project of the Committee for a Responsible Federal Budget. said that eliminating the taxes without making up for the loss of revenues would expand Social Security’s cash shortfall by trillions of dollars and lead to larger benefit cuts in the coming years
“It’s hard for me to imagine that Democrats would be willing to provide votes to get over that 60-vote threshold and weaken Social Security solvency,” said Charles Blahous, senior research strategist at the Mercatus Center at George Mason University, who has also served as a public trustee for Social Security and Medicare. “I think a lot of Republicans would have heartburn about it, too,” he told CNBC.
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