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.