By Michael Collins
Scripps Howard News Service
March 23, 2005
A federal budget amendment approved by the Senate last week would remedy that situation.
The amendment, sponsored by Sen. Jim Bunning, R-Ky., would cut the maximum amount of Social Security benefits that is taxable from 85 percent to 50 percent _ the same as it was in 1993.
It remains to be seen whether the proposal will make it into the final budget. It's not in the House version and critics are lining up against it, saying the amendment will increase the federal deficit and that the tax break mainly benefits wealthy retirees.
Bunning, however, is standing by his proposal.
"America's seniors have worked hard all their lives contributing to the Social Security system, and they should not have to bear the burden of this excessive tax increase," Bunning said in a statement released by his office.
The senator described his amendment as "a big win for millions of taxpaying seniors all across America" and said it "puts more money back in the pockets of millions of our seniors for them to spend on things like prescription drugs."
Critics, however, charge that the only seniors who would benefit are those with the highest incomes, or roughly one-quarter of all beneficiaries.
"You're not talking here about Social Security beneficiaries who are really struggling to get by," said James Horney, a budget analyst with the Center on Budget and Policy Priorities, a liberal public interest group.
"This is the people with the highest incomes among the beneficiaries."
Technically, the change applies to couples making more than $44,000 and individuals making more than $34,000. But a survey conducted seven years ago by the Federal Reserve Board concluded that the average income of those who would get a tax cut under the Bunning plan was $96,300. Those same beneficiaries had average financial assets of $607,000 and an average net worth of nearly $1.1 million.
Furthermore, some analysts say that, with the passage of the amendment, the Senate's final budget plan would increase the federal deficit by $217 billion over five years.
More importantly, said Harry Zeeve of the Concord Coalition, a nonpartisan group that advocates a balanced budget, the amendment "sends the signal that it's a lot easier to talk about fiscal responsibility than to legislate in a fiscally responsible fashion."
Zeeve added: "When you are looking at deficits as far as the eye can see, it's hard to call this a fiscally responsible amendment."
Horney said the amendment also would put Medicare in jeopardy. Revenue from the 1993 tax increase on Social Security is paid into the Medicare trust fund. Repealing that increase would mean that less money is going into the trust fund and that the program would become insolvent by 2015, four years earlier than projected, Horney said.
Bunning spokesman Mike Reynard, however, said Medicare would not be affected. The senator has been trying to get the Social Security tax increase repealed for more than a decade and has always intended for any money taken out of the Medicare fund to be replenished with general fund revenues, Reynard said.
Reynard also stressed that, while it is Bunning's goal to repeal the Social Security tax increase, the amendment does nothing more than add another $64 billion in tax cuts to the Senate budget plan.
Any change in tax-cut policy must be approved by the Senate Finance Committee, which might or might not decide to eliminate the Social Security tax hike. "This amendment gives them the money to do it," Reynard said. "It doesn't mean they have to do it."
As for concerns that the amendment would increase the federal deficit, Reynard said, Bunning "is committed to a fiscally responsible budget and reducing the deficit. This is all part of the larger framework. The real work is ahead of us."