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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 2016 Trustees Report


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  Change from present law
[percent of payroll]
Shortfall eliminated
Long-range
actuarial
balance
Annual
balance in
75th year
Long-range
actuarial
balance
Annual
balance in
75th year
Present law shortfall in long-range actuarial balance is 2.66 percent of payroll and in annual balance for the 75th year is 4.35 percent of payroll.
H1 Starting in 2017, tax Social Security benefits in a manner similar to private pension income. Phase out the lower-income thresholds during 2017-2026.
graph | table | pdf-graph | pdf-table | memo (Social Security Advisory Board)
0.21 0.15 8% 3%
H2 Starting in 2017, tax Social Security benefits in a manner similar to private pension income. Phase out the lower-income thresholds during 2017-2036.
graph | table | pdf-graph | pdf-table | memo (Warshawsky)
0.19 0.15 7% 3%
H3 Starting in 2018, 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)
-0.02 -0.06 -1% -1%
H4 Increase the threshold for taxation of OASDI benefits to $50,000 for single filers and $100,000 for joint filers starting in 2018. 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)
-0.12 -0.01 -4% 0%
H5 Beginning in 2023, 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%
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Last reviewed or modified October 12, 2016