GOP Pushes End to 1993 Hike in Taxes on Social Security Benefits
July 27, 2000
House Republicans are moving to repeal the increased incomes taxes on Social
Security benefits that were instituted as part of the Clinton administration's
1993 budget plan. However, many fear that the repeal would both deny funds to
Medicare and open the door to general revenue funding of Social Security.
The 1983 Social Security amendments made up to 50 percent of a retiree's benefits
subject to income taxes for single beneficiaries with incomes over $25,000 and
couples with incomes over $32,000. The Clinton administration's 1993 budget
deal raised taxation to 85 percent of benefits for single beneficiaries with
incomes over $34,000 and couples over $44,000.
Approximately 19 percent of Social Security beneficiaries, 9 million in all,
pay the higher tax, according to the Social Security Administration. Affected
retirees would pay an average $1,180 tax on their Social Security benefits in
2001, according to the Joint Committee on Taxation. The proceeds of this tax
are credited to the Medicare trust fund, which faces funding deficits even sooner
than Social Security.
The Senate voted two weeks ago to repeal the 1993 tax increase, and on Wednesday
the House Ways and Means Committee passed H.R.
4865 , the "Social
Security Benefits Tax Relief Act," by a vote of 22-15. The legislation would
repeal the 85-percent taxation of Social Security benefits, returning the maximum
amount of Social Security benefits included in gross income to the 50 percent
level prior to the 1993 changes. It would make up the lost income to the Medicare
trust fund with general revenue transfers.
Proponents of the bill say it repeals an unfair tax and that the extra income
for some seniors would make it easier for them to purchase prescription drugs.
Critics like the Concord
Coalition believe the tax elimination is "an election year tax break [for]
higher income seniors" that "is not wise fiscal policy." The repeal would deny
Medicare of $100 billion in dedicated revenue over the next ten years and $464
billion through 2024.
Also of concern is how these missing funds would be made up: out of on-budget
surpluses. However desirable it may be to repeal the tax on Social Security
benefits, this legislation constitutes an open-ended commitment of general revenues
to Medicare. Vice President Gore's Social Security plan is based upon the same
idea, and has been criticized by many for it. "In their eagerness to give a
tax cut, Republicans may have been too clever for their own good," said Robert
Bixby, executive director of the Concord Coalition.
"To avoid harming Medicare, Republicans have implicitly endorsed Gore's approach
to Social Security reform, which is to shore up the trust fund with future general
revenues."
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