Hitch In Tax Code Hurting Many Seniors

This is a great article exposing an injustice in the tax code that is beginning to affect more and more seniors every year. Here is a quote from the article discussing the issue:

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The tax on Social Security income has not been adjusted for inflation since it was enacted 23 years ago. But unlike the alternative minimum tax, which has caused an uproar because it has started to affect those earning less than $100,000, this hitch in the tax code is getting almost no attention.

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Why is this tax beginning to hit seniors so hard? Well the income limits were set 23 years ago and they are very low and are starting to affect millions of middle income seniors.

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For a single senior, each dollar of income above $25,000 makes 50 cents of his or her Social Security benefits taxable. For married couples, that threshold is $32,000.The tax accelerates above income levels of $34,000 for singles and $44,000 for married couples, when each new dollar of income makes 85 cents of benefits taxable.

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And if that wasn't bad enough, there is a double taxation build into the law as stated in the following excerpt:

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Seniors also note that double taxation is built into the law. Blake Heffner, a retiree from Hellertown, Pa., complains that if he made a sage investment that generated a $1,000 capital gain, he'd end up paying for it twice. First, he'd pay a 15 percent tax on the capital gain. But that gain would push $500 to $850 of his Social Security income into the taxable column, too. In the end, he'd pay $225 to $277 in taxes on the $1,000 gain, even though he'd still be in the 15 percent bracket.

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So, is anything going to happen in the near future to right this unfair tax law. With our tax hungary government it doesn't look good:

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But experts say it's an uphill climb. More than $14.5 billion in revenue is collected through the taxes each year. That's only a fraction of the $472 billion that comes in annually from payroll taxes, but legislators say it's too much money to give up in light of projected shortfalls in Social Security funding.

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