Congressional Corner from Senator Tim Hutchinson: Let’s Roll Back the Tax on Social Security Benefits

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Congressional Corner from Senator Tim Hutchinson: Let’s Roll Back the Tax on Social Security Benefits

By Senator Tim Hutchinson (R-AR-107th Congress)

For millions of American seniors, Social Security benefits are an integral part of their ability to retire without depending on others financially. After paying a lifetime of payroll taxes, the return they receive on their money may not be great, but the benefits seniors receive are certainly well earned. Unfortunately, a tax increase passed in 1993 is unfairly depleting the Social Security benefits of ten million Americans.

The 1993 tax increase expanded the amount of Social Security benefits subject to taxation from 50 to 85 percent. Since the income thresholds are not indexed for inflation, more and more low- and middle-income seniors will be taxed each year. In fact, it has been estimated that an additional 7.5 million Americans will be forced to pay this tax in 2010. In 2000, the average tax bill was $1,180. By 2010, the average bill will grow to $1,359.

This tax increase on senior citizens made a bad policy even worse. Essentially, this graduated tax scheme penalizes seniors who have worked hard to ensure their retirement security. Though Social Security was never intended to be the sole source of retirement income, this tax leaves some seniors who have worked hard and saved for retirement with far fewer benefits. It is especially harmful to seniors on fixed incomes. The tax is opposed by a number of organizations, including TREA Senior Citizens League, AARP, the National Committee to Preserve Social Security & Medicare, and the United Seniors Association.

To relieve the tax burden on seniors in Arkansas and around the nation, I have authored S. 237, the Social Security Benefits Tax Relief Act. This important legislation, which enjoys the co-sponsorship of 20 of my Senate colleagues, would roll back the Social Security tax to the pre-1993 level. As Congress considers measures to strengthen retirement security, I hope my proposal will be considered as part of a larger package.

Congress has already acted in a bipartisan manner to repeal the Social Security earnings limit, which will allow hundreds of thousands of seniors around the nation and in Arkansas to work after they reach full retirement age without losing one out of every three dollars they earn. The earnings limit was first enacted during the Depression to encourage seniors to leave the workforce so that employment would become available for younger workers. Congress should again come together to support our seniors and eliminate the unfair 1993 Social Security benefit tax as well.

In light of Social Security's financial troubles, now is the time to remove disincentives for those who wish to save and plan early for their retirement. Hopefully, the Social Security Benefits Tax Relief Act will be a first step toward the repeal of all taxes on Social Security benefits.

To see if your Senators are co-sponsors of S.237, click here: http://action.tscl.org/listcosponsors.asp?code=S237.

September 2002