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Social security taxation history. I am so sorry.
You might know this but there is a little time bomb buried in our laws for everyone collecting or going to collect social security (SS).
The bomb just hit me. Its ok..I will survive....but its gonna hit you even worse...especially if the try and reduce the SS for individuals cause its an "entitlement".
If you look through the official history of taxing SS at the above link, you will see that due to rampant inflation in the 1970s, the SS system was in trouble.
What to do? Reagan and congress decided to tax up to 50 percent of SS benefits on those filthy rich people who made over $25,000 a year (single filer) in retirement. $25,000 was alot of money
back in 1983. Trouble is, for you and me, they didnt index that $25,000 to inflation. Clinton and AlGore raised the amount to 85% in 1993.
The bomb is, without indexing the $25,000 to inflation, as inflation keeps piling on, eventually almost everyone with a pension or anyone taking money out of an IRA will then be paying taxes on 85% of their social security. You might think
this is an oversite by the hundreds of Lawyers in two sessions of congress, Reagan, Greenspan, Clinton, and AlGore.....hundreds of lawyers who just went through an era of double digit inflation....
I don't think so. This was, and is, a very carefully orchestrated attack on the middle class to save their sorry butts. I dont have a big pension. My pension a few hundred a month. But I took some money out of an IRA, which of course
I expected to pay 15 percent taxes on , which is fair. What I didnt expect was the added taxes I then had to pay on my Social Security. It ended up costing me 25 percent taxes on my IRA withdrawl. Don't ask me if I trust my government.
The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote.
The basic rule put in place was that up to 50% of Social Security benefits could be added to taxable income, if the taxpayer's total income exceeded certain thresholds.
The taxation of benefits was a proposal which came from the Greenspan Commission appointed by President Reagan and chaired by Alan Greenspan (who went on to later become the Chairman of the Federal Reserve).
The full text of the Greenspan Commission report is available on our website.
President's Reagan's signing statement for the 1983 Amendments can also be found on our website.
A detailed explanation of the provisions of the 1983 law is also available on the website.
In 1993, legislation was enacted which had the effect of increasing the tax put in place under the 1983 law. It raised from 50% to 85% the portion of Social Security benefits subject to taxation; but the increased percentage only applied to "higher income" beneficiaries. Beneficiaries of modest incomes might still be subject to the 50% rate, or to no taxation at all, depending on their overall taxable income.
This change in the tax rate was one provision in a massive Omnibus Budget Reconciliation Act (OBRA) passed that year. The OBRA 1993 legislation was deadlocked in the Senate on a tie vote of 50-50 and Vice President Al Gore cast the deciding vote in favor of passage. President Clinton signed the bill into law on August 10, 1993.
Wicked Yankee Girl
All true. But not secret.
It's why you should calculate the effect on your taxes every time you think a change you are making in your financial life is a good change.
I detest what has been done to the word "entitled"
When you are entitled to something, you are supposed to get it. I paid into Social Security all my working life; and so did you Chris; I think we are entitled to collect it. I don't think that is a bad thing.
I did my mother's taxes for ten years. She was taxed on her Social Security. During her active years, she worked sometimes seven days a week, and she earned every cent of her payments, but she was glad to pay her fair share of taxes too. I wish taxes were easier to figure out, too, so we could prepare for changes, but I don't think any confusion is the result of some nefarious plot by the government. Nobody is that smart. And if anyone is that smart, it's still impossible to get everyone to listen and agree with that very smart person. If you visualize the U.S. as a huge boat with everyone rowing in a different direction, you can see why things don't fit together smoothly. Really, it's still better than living somewhere where the trains run on time, as they did in Mussolini's Italy. The only way for a big country to be truly efficient is for just one person to do the thinking....we don't want that, really.
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Hey Doris, I am with you! We PAID into SS and now those politicians are calling us “takers” and “system users.” Well, they calculated that due to the frog in the boiling water theory, the middle class would never complain if their taxes went up a little bit every year. Think about it. In 1983, $25,000 had the same value as $57,000 does today. If you earned $57,000, you wouldn’t have to pay any taxes at all on your social security….that’s not so bad….but inflation is very cruel, and can and has be used as a weapon. Well, next year (this tax year) I will be more careful. I will take out just enough to avoid having to pay taxes on my SS. Fool me once, shame on you. Fool me twice, shame on me.
Originally Posted by dorispulaski
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Oh dont get me wrong...I could leave if I want and live in a socialist society...but I am an American. But seeing the middle class being taxed when the upper class gets off easy is hard to take. Please dont take this personally, but You dont think there are people in the government who do nefareous plots, Huh? Look up FDR supreame court packing.....at least that one was out in the open...not like when he ordered the Navy to send a ship into Japanese waters and get into trouble before we got into WWII. The worst was the Gulf of Tonkin fake incident that was ordered to provide Johnson an excuse to expand the Vietnam war . The feral govt is full of nefareous plots. For me to be wrong would be to call hundreds of senators, congressmen, Reagan, Clinton, and Greenspan stupid idiots. From 1979 through 1981 we had over 30 percent inflation. It wasnt pretty. Everyone of those lawyers KNEW what would happen over the years to that $25,000....yet "good" men did nothing. And they are still doing nothing. I have no problem paying my fair share...I just want Oprah to pay hers. And I want the govt officils to stop calling my SS check an "entitlement". (The trains run on time in Switzerland too...you wanna know where they get THEIR money from? It aint Swiss watches) I will stay here where I was allowed to succeed by lots of self bootstrapping and hard work....until LBJ and about every president after him tore the country appart.
Originally Posted by Olympia
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people ssdi is broke in 2016. Borrowing and not returning. This was known way before 2008 collapse. many disabled are young-i was totally disabled by 28 due to medical procedure. See, I'm terrified. Most people on SSDI don't know. Now we have gridlock, sequester, every 2 months a mess. Tours to what house stopped by Obama. The secret service guards will be furloughed and they say it won't be safe. So it is a desperate act to get the attenton of Americans who travel to visit Whitehouse. People like me r living in terror. The want us to die, much cheaper. Sorry, this country is not ours anymore-knowledge xexperience is total cynicism. For me, the 2000 election was the final straw, when Gore won florida, jeb fixed things and the Supreme court handed down spli decision. I cried. My intuitions about Bush(negative) all came true.
He is responsible for tax cuts and spending big. He had a surplus! How many American know or care? History/civics must be so boring as the HS grads in my city are barely literate.
I guess I better pray much, much more. Benedict pope emeritus I hope has God's ear in his seclusion. God please help America and these hatefilled pols in DC.
Wicked Yankee Girl
skateluvr, I am fairly sure they will fund ssdi from the general Social Security fund after 2016, which will just make it run out faster.
Also, when you hit 65, your SSDI changes over to regular Social Security; my husband was disabled in 2000 due to a problem with a medical procedure, but when he hit 65, his check came from the social security fund rather than the SSDI fund, so that's how I know. The amount of the check was the same though.
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This was in the paper today....it is a commentary but if it is true, I have learned an important part of American history.....
Robert J. Samuelson: JFK policy to blame for economic havoc
Blame it on JFK.
Fifty years ago, President Kennedy made a decision that, with hindsight, ranks as the biggest mistake of domestic policy since World War II. In many ways, it led directly to today’s “sequester” debacle.
What Kennedy did was this: In early 1963, he proposed a $13.6 billion tax cut (today: about $320 billion) even though the economy was not in recession and the tax cut would enlarge the budget deficit. Kennedy adopted the theory that government could, by manipulating its budgets, increase economic growth, reach “full employment” (then: a 4 percent unemployment rate) and reduce – or eliminate – recessions.
It was a disaster.
High inflation was the first shock. An initial boom (by 1969, unemployment was 3.5 percent) spawned a wage-price spiral. With government seeming to guarantee 4 percent unemployment, workers and businesses had little reason to restrain wages and prices. In 1960, inflation was 1 percent; by 1980, it was 13 percent. The economy became less stable. From 1969 to 1982, there were four recessions, as the Federal Reserve alternated between trying to push unemployment down and prevent inflation from going up. Only in the early 1980s did the Fed, under Paul Volcker and with Ronald Reagan’s support, crush inflationary psychology.
We are now suffering from – and have for decades – the second defect of JFK’s decision: the loss of budgetary discipline.
Since Kennedy’s tax cut passed in 1964 – after his assassination – there have been 43 budget deficits and only five surpluses (1969, 1998, 1999, 2000 and 2001). Even the surpluses reflected luck more than policy. The last four resulted mostly from the 1990s economic boom, boosting tax revenues, and the end of the Cold War, lowering military spending.
Balancing a budget compels choice. Pleasurable spending must be weighed against painful taxes. Before Kennedy’s tax cut, it was assumed that, in ordinary times, Americans would strive to balance the federal budget. They might not have always succeeded, but they often came close. Wars and economic slumps were exceptions when borrowing became a practical necessity. The government consistently ran deficits in the Great Depression of the 1930s.
But debt was generally bad. In the Civil War, the federal debt rose 42 times to a then-astounding $2.8 billion. Repaying it became a “national obsession,” writes political scientist James Savage in his “Balanced Budgets & American Politics.” One English diplomat observed that most Americans “appear disposed to endure any amount of sacrifice rather than bequeath a portion of their debt to future generations.”
Kennedy himself initially accepted the virtue of balanced budgets and had to be converted to Keynesian economic doctrines (after John Maynard Keynes, 1883-1946). In 1962, his advisers urged a big tax cut; Kennedy rejected it. Led by Walter Heller, the economists peppered Kennedy with more than 300 memos in his thousand-day presidency. By 1963, he’d come around.
Debt became benign. The promise of Kennedy’s tax cuts was that, by promoting faster and more stable economic growth, government could afford more because the economy would perform better. When Republicans proposed “supply side” tax cuts in the 1980s, they made similar arguments and referred admiringly to Kennedy. Over time, what was politically convenient – higher spending, lower taxes – became habit-forming. It pleased the public, which deplored deficits in the abstract but rejected specific (unpopular) measures to control them.
Without pressure to balance the budget, choices were delayed or denied. Discipline diminished. When politicians needed to “do something” about deficits, they resorted to obtuse, often ineffective formulas that fudged choices by making across-the-board changes to both good and bad programs. Think: “budget caps,” “spending recessions” and “continuing resolutions.” The sequester is the latest and most grotesque example of this approach.
To be sure, deficits are sometimes desirable. In a recession, the “automatic stabilizers” (the tendency of taxes to fall and spending to rise) help revive the economy. A deep downturn, such as the Great Recession, may justify extra borrowing, spending or tax cuts. The irony is that the careless use of deficits, by piling up unnecessary debt, has compromised this legitimate role. It’s one unnoticed consequence of downgrading the budget as an instrument to force decisions about government’s size and role. (A constitutional balanced-budget amendment is not a solution. Even if ratified – doubtful – it could ruinously turn every budget dispute into a legal crisis.)
Kennedy and his advisers, overconfident of their ability to control the economy, damaged long-standing national norms and customs. They didn’t know what they were doing. It is hard to think of another policy decision in recent decades that has caused so much havoc for so long. Deficits became routine events rather than emergency reactions. Keynes said “in the long run we are all dead”; but others are alive and suffer from distant blunders.
Robert J. Samuelson is a columnist for the Washington Post Writers Group.
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About inflation, I think we ain't seen nothin' yet.
The U.S. is 17 trillion dollars in debt. Sooner or later the IOU holders are going to want to see some money. Not having any, the U.S. treasury will have no choice but to print more dollars.