The Hidden Tax on Social Security Benefits

Until 1984, social security benefits were exempt from federal income tax. In my opinion this is the way it should have remained since the payment of social security tax was not ever deductible. However in 1984 and again in 1993 the democrats changed the rules to make a portion of the benefits up to 85% taxable.  In general if your income plus 1/2 of your social security benefits is less than $25,000 if you are single or $32,000 if your file jointly then there will be no taxable social security benefits. Between $25,000 and $34,000 if single and between $32,000 and $44,000 if joint, then up to 50% of the social security benefits are taxable. Over the $34,000 and $44,000 amounts then up to 85% is taxable. This effect causes marginal tax rates to go haywire when additional income pushes you above these thresholds. It is even worse if you file married filing separately because 85% of the social security benefits are taxable, and you skip the lower income thresholds.