OK let’s continue this week with dispelling the misconceptions when it comes to Social Security. Again, we are getting this information right from ssa.gov. We have two questions and answers this week: First: Which political party eliminated the income tax deduction for Social Security (FICA) withholding? The answer: There was never any provision of law making the Social Security taxes paid by employee’s deductible for income tax purposes. In fact, the 1935 law expressly forbid this idea, in Section 803 of Title VIII. Next question: Which political party started taxing Social Security annuities? The taxation of Social Security began in 1984 following passage of a set of Amendments in 1983, which were signed into law by President Reagan in April 1983. These amendments passed the Congress in 1983 on an overwhelmingly bi-partisan vote. The basic rule put in place was that up to 50% of Social Security benefits could be added to taxable income, if the taxpayer's total income exceeded certain thresholds. The taxation of benefits was a proposal which came from the Greenspan Commission appointed by President Reagan and chaired by Alan Greenspan (who went on to later become the Chairman of the Federal Reserve). If you want to get into more details about this, go to ssa.gov they have links and you can download the full text of the Greenspan report and the provisions of the 1983 law.
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