[Congressional Record Volume 143, Number 10 (Thursday, January 30, 1997)]
[Senate]
[Pages S878-S879]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. McCAIN:
  S. 244. A bill to amend the Internal Revenue Code of 1986 to repeal 
the increase in the tax on Social Security benefits; to the Committee 
on Finance.


                    THE SENIOR CITIZENS' EQUITY ACT

  Mr. McCAIN. Mr. President, I introduce legislation that repeals the 
increase in tax on Social Security benefits. The Omnibus Budget 
Reconciliation Act of 1993 increased the taxable proportion of Social 
Security benefits from 50 to 85 percent for Social Security recipients 
whose threshold incomes exceed $34,000--(single)--and $44,000--
(couples). The legislation I am introducing today simply phases out 
this increase gradually over a 4-year period. In 1997, the applicable 
percentage would be 75 percent; in 1998, 65 percent; in 1999, 60 
percent; in 2000, 55 percent; and finally in 2001, the taxable 
percentage would return to 50 percent.
  I believe the increase in the taxable portion of Social Security 
benefits was blatantly unfair because it changed the rules in the 
middle of the game. Responsible senior citizens who had carefully 
planned for their retirement were penalized and saw their income fall 
while their marginal tax rate skyrocketed. Nearly 9,000 seniors 
representing 23.4 percent of recipients are affected by this provision. 
These Seniors relied on, and based their decisions on, the old law, and 
they have no recourse to go back in time to change their decisions 
based on the new law.
  Clearly, we should be encouraging all Americans to save and invest 
for the future. We can no longer expect that Social Security benefits 
will take care of all our retirement needs. If Congress continues to 
change the rules after plans and investment decisions have been made, 
we will diminish the incentive for Americans to prepare for the future 
and plan accordingly.
  I am consistently amazed by the perverse disincentives Congress 
enacts. Aside from being patently unfair, taxing 85 percent of Social 
Security benefits above the current income levels creates a tremendous 
disincentive for affected seniors to work. It simply doesn't make sense 
to work if every dollar you earn over the threshold drastically reduces 
your Social Security benefits.
  I am pleased that this legislation is supported by the National 
Committee to Preserve Social Security and Medicare and the Seniors 
Coalition. I ask unanimous consent to submit their letters of 
endorsement into the Record.
  The problems with this additional tax on Social Security benefits are 
strikingly similar to the Social Security earnings limit. I am pleased 
that Congress finally enacted an increase in the earnings limit last 
year and I hope that we will act expeditiously on this legislation.
  There being no objection, the letters were ordered to be printed in 
the Record, as follows:

                                        The Seniors Coalition,

                                    Fairfax, VA, January 27, 1997.
     Hon. John McCain,
     U.S. Senate,
     Washington, DC.
       Dear Senator McCain: On behalf of the 2.4 million members 
     of The Seniors Coalition, I would like to express our strong 
     support for your legislation repealing the 1993 increase in 
     taxes on Social Security benefits. While this legislation is 
     desirable, total repeal would be preferable.
       The arguments you made at the time of introduction are 
     certainly persuasive. However, they apply as much to a tax on 
     50 percent of benefits as they do to a tax on 85 percent of 
     benefits. We understand the arguments in favor of taxes on 
     some portion of benefits, and recognize the supposed adverse 
     revenue impacts from total repeal. Accordingly, while The 
     Seniors Coalition would prefer to see total repeal of all 
     taxes on Social Security benefits, we do recommend immediate 
     passage of your bill at least rolling back the 1993 increase. 
     We will be happy to make this case in public hearings, and 
     you certainly have permission to use our support to promote 
     passage of the bill.
       Please let us know if there are further steps we can take 
     to move this legislation to passage.
           Sincerely,
                                                   Thair Phillips,
     Chief Executive Officer.
                                  ____

                                    National Committee To Preserve


                                 Social Security and Medicare,

                                 Washington, DC, January 28, 1997.
     Hon. John McCain,
     U.S. Senate, Russell Senate Office Building, Washington, DC.
       Dear Senator McCain: The National Committee to Preserve 
     Social Security and Medicare welcomes as a major step in the 
     right direction your legislation to repeal the inequitable 
     tax increase on Social Security benefits enacted as part of 
     the 1993 budget reconciliation bill.

[[Page S879]]

       The Omnibus Budget Reconciliation Act of 1993 increased the 
     amount of Social Security benefits subject to tax from 50 
     percent to 85 percent for individual beneficiaries with 
     income above $34,000 or for couples with income above 
     $44,000. The ``Senior Citizens' Equity Act'' would gradually 
     phase out this increase and return the taxable percentage to 
     50 percent by the year 2001.
       The 1993 tax increase affects not only wealthy seniors but 
     also middle income seniors. It unfairly penalizes responsible 
     senior citizens who planned for their retirement through 
     employment, saving, and investment. Many National Committee 
     Members need or want to work, but they also deserve to 
     receive their retirement benefits. Whether the senior works 
     out of the need for income or the pleasure of working, taxing 
     85 percent of social security benefits over the current 
     income thresholds exacts a high price. The increased tax rate 
     only discourages work and retirement savings.
       Moreover, a Price-Waterhouse analysis demonstrated that the 
     1993 bill targeted seniors by increasing their tax burden 
     more than non-seniors in every income category--on average 
     twice as great for senior families as non-senior families. 
     Middle income seniors experienced a disproportionately large 
     tax increase under the 1993 bill. For your information, we 
     are enclosing a summary of the Price-Waterhouse data.
       On behalf of older Americans, we thank you for your work to 
     enact this important legislation.
           Sincerely,
                                                Martha A. McSteen,
                                                        President.
       Enclosure.

 Budget Reconciliation Conference Agreement Unfairly Targets America's 
                                Seniors

       The table below, compiled by Price-Waterhouse, demonstrates 
     that the budget reconciliation conference agreement targets 
     seniors by increasing their tax burden more than non-seniors 
     in every income category--on average twice as great for 
     senior families as non-senior families.
       Families in the lowest income category will receive a tax 
     cut of 28.1% while elderly families in the same category will 
     see a tax increase of 4.6%. Senior families in the second 
     lowest income category will see a tax increase of 3.8% while 
     all families in the same category will see a reduction of 
     1.1%. While seniors in these groups are unaffected by the 
     increased tax on Social Security benefits, they are affected 
     by the energy tax and receive little or no assistance from 
     the earned income tax credit.
       Middle income seniors also will see a disproportionately 
     large tax increase. Seniors with income between $24,000 and 
     $72,000 will have tax increases that are 2.5 to 6 times 
     higher than non-senior families without children in 
     comparable income classes.
       Under the conference bill, seniors will face an average 
     increased tax burden of 7.5%, more than double the 3.5% 
     increase for non-seniors without children.

  PERCENTAGE CHANGE IN FEDERAL TAXES \1\ FROM RECONCILIATION CONFERENCE
        BILL BY 2-PERSON FAMILY INCOME CLASSES \2\ BY FAMILY TYPE
             [1994 income levels for 1998 proposed tax law]
------------------------------------------------------------------------
                                                       Non-
                                                      senior
  Adjusted family income for 2 persons     Senior    families     All
                                          families     w/o      families
                                                     children
------------------------------------------------------------------------
0-$12,900..............................        4.6       -4.3      -28.1
$12,901-$23,600........................        3.8        0.8       -1.1
$23,601-$35,300........................        2.8        1.0        1.0
$35,301-$53,300........................        2.3        0.9        1.0
$53.301-$72,000........................        6.4        1.0        1.4
$$72,000 or more.......................        9.8        6.5        8.4
All....................................        7.5        3.5        3.8
------------------------------------------------------------------------
\1\ Includes all permanent tax changes in conference agreement and
  includes the outlay portion of the earned income tax credit.
\2\ Percentage change in taxes is for all families by family size
  adjusted income quintiles. For example, first quindle is for families
  with incomes below 145% of the poverty threshold (e.g., a 2 person
  family income of less than $12,900).
 
Source: Congressional Budget Office data complied by Price Waterhouse.
  CBO distribution table dated August 2, 1993.

                                 ______