[Congressional Record (Bound Edition), Volume 150 (2004), Part 3]
[House]
[Page 3062]
[From the U.S. Government Publishing Office, www.gpo.gov]




           SOCIAL SECURITY: TAXING BENEFITS, LIMITING CHOICE

  Mr. STEARNS. Mr. Speaker, last week the chairman of the Federal 
Reserve, Alan Greenspan, gave some seniors all over the country a 
little bit of a scare. But his suggestion that Congress should consider 
reducing Social Security benefits for future retirees was just that, a 
suggestion by the chairman. Current beneficiaries and near retirees 
should not worry. All of us, including myself, will fight to protect 
the benefits of current and near retirees. They should receive nothing 
less than 100 percent of what they have been promised.
  What seniors should take from this conversation, though, is that 
Social Security is just that, a promise from our government. It is not 
a real asset in your name. If it were, you would have a little more 
flexibility and decision-making on how you plan to use it for your 
retirement. Currently, Social Security gives retirees a one-two punch: 
first, taxing their benefits; and, second, discouraging productivity 
among early retirees by limiting their earnings.
  I would like to talk about the first of these shortcomings today, 
taxation of benefits after you receive the check.
  Until 1984, Social Security benefits were exempt from the Federal 
income tax. For years, many analysts questioned the basis for the IRS 
rulings and advocated that the tax treatment of Social Security be the 
same as for other pension income, because there are other options for 
retirement planning today than traditional pensions, other options that 
are taxed differently, thereby serving as an alternative retirement 
planning tool. I am referring to the nearly 7-year-old Roth IRA 
account. But first let me explain further about Social Security 
taxation of benefits.
  If a Social Security beneficiary files a Federal tax return as an 
individual and his combined income is between $25,000 and $34,000, he 
may have to pay income tax on 50 percent of those benefits. If his 
combined income is above $34,000, up to 85 percent of his Social 
Security benefit is subject to income tax. That hurts. If he files a 
joint return, he may have to pay taxes on 50 percent of his benefits if 
the spouse's combined income is between $32,000 and $44,000. But, Mr. 
Speaker, if that couple's combined income is more than $44,000, up to 
85 percent of those folks' Social Security benefits are subject to 
income tax. Of course, to help discipline your money management, the 
pain of the IRS withholding the taxes along the way is available. So 
after a lifetime of seeing your paycheck eroded by taxation, inflation, 
you are not done when you are a senior receiving your Social Security 
benefits.
  My objection, Mr. Speaker, to this is that we are limiting retirees' 
options on how they plan for their own retirement. For some of us, a 
preferred option while we are young in our working years might be to 
not have our retirement savings withheld before payroll taxes. Maybe we 
are willing to pay annual income taxes on all of it each year in 
exchange for the long-term security of knowing it will be free from 
taxation later, on earnings and withdrawal. Some would rather pay Uncle 
Sam up front like this. This is why the Taxpayer Relief Act of 1997 
authorized the new Roth IRA to provide tax-free income from after-tax 
contributions.
  But there is a bill that remedies this taxation of benefits when a 
senior thought he or she was on the receiving end, not the contributing 
end, of life. I am proud to cosponsor the bill of the gentleman from 
Texas (Mr. Sam Johnson), H.R. 434, the Social Security Benefits Tax 
Relief Act of 2003, which would repeal the 1993 income tax increase on 
Social Security benefits that President Clinton signed as a bill.
  Again, this is all about choices. Social Security is one of our 
government's most popular domestic programs. Since its inception at the 
heart of the Great Depression, it has become the primary and often sole 
source of income for millions of Americans. However, it, like so many 
other staid Federal Government programs, is a one-size-fits-all program 
for an American people who want to try different sizes and have 
different choices. Just as we prefer choice in our health care, rather 
than a government-run system, some retirees, at least future ones, 
might prefer choice in retirement vehicles, and Social Security does 
not offer that.
  I reiterate, Mr. Speaker, that current and near retirees need not 
fear alteration of their current benefits. But we should glean 
something from Chairman Greenspan's comments. As examination of the 
program occurs, let us consider all the aspects, lack of individual 
assets; noninheritability to one's children; penalties for early, 
partial retirement; and the taxation of one's benefits, that make it 
less than a truly secure choice and system.

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