Social Security recipients who have to pay federal income taxes on their benefits got a ray of hope last fall when a bill was introduced to the U.S. Senate that aimed to begin a total phaseout of those taxes. But at least one Social Security expert said the bill is likely to go nowhere in the current political environment.
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As previously reported by GOBankingRates, U.S. Sen. Pete Ricketts (R-Neb.) in September introduced the Social Security Check Tax Cut Act as a way of eliminating federal taxes on Social Security benefits. The bill was modeled after a successful earlier effort to eliminate state taxes on Social Security benefits initiated when Ricketts was Nebraska’s governor.
“All Social Security benefits should be completely tax-free. My bill helps us get there in a fiscally responsible way,” Ricketts said in a Sept. 14 news release.
A few days later, Ricketts told a group of seniors, state senators and other stakeholders that his bill would cut the federal tax on Social Security benefits by 20% over two years, beginning with a 10% cut in year one and increasing to 20% in year two. Under his plan, Congress could continue phasing out the tax by 10% a year and make all Social Security income tax free by 2033.
“By passing this bill, we can take the first step in boosting the retirement income of millions of seniors in Nebraska and across the country,” Ricketts said.
As it stands now, recipients must pay taxes on benefits if they have “substantial” outside income from sources such as wages, self-employment, interest, dividends and other taxable income, according to the Social Security Administration.
Individuals with provisional income above $25,000 ($32,000 for joint filers) must pay taxes on up to 50% of their Social Security benefits. For individuals with provisional income above $34,000 ($44,000 for joint filers), up to 85% of Social Security is taxed.
Although Ricketts’ bill would end the taxes, it’s unlikely to succeed, according to Victoria Haneman, a professor at the Creighton University School of Law.
In an interview with Omaha’s WOWT not long after Ricketts introduced his bill, Haneman called such legislation “a little bit tiresome because it’s not new, and I mean it’s one of those things that continuously gets floated.”
The main problem, she said, is that amending Social Security requires 60 votes in the Senate — and neither political party has held 60 seats since the 1970s.
“Ricketts’ proposal will go nowhere unless it’s backed by bipartisan support, which was less of a challenge for him when he was governor in a politically conservative state,” Haneman said. “But our junior Senator may not understand now the importance of reaching across the aisle on these types of initiatives.”
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This article originally appeared on GOBankingRates.com: Social Security Expert: Proposed Bill To Cut Taxes ‘Will Go Nowhere’ Despite Claim of Saving Seniors Millions