Quick Take
Posts on Facebook and Twitter suggest that former Vice President Joe Biden is responsible for taxes on Social Security, but those posts ignore the political history and mislead on the details. The posts also twist Biden’s proposals on retirement contributions.
Full Story
A claim linking Joe Biden to Social Security taxes has been shared widely online, but it offers a misleading interpretation of how the taxes were established, Biden’s role and the vice president’s tax plan.
Text posts shared on Facebook and Twitter — where actor and wellspring of dubious claims James Woods garnered more than 45,000 retweets — make this claim: “Prior to 1983, social security was not taxable. Joe Biden voted successfully in favor of taxing 50% of social security. In 1993, Joe Biden was the deciding vote in raising taxes on social security from 50% to 85%. Now he wants to tax our 401k’s and IRA’s (page 78, Dems’ platform)”
We’ll address each of the three parts of that claim below.
“Prior to 1983, social security was not taxable. Joe Biden voted successfully in favor of taxing 50% of social security.”
That’s not the whole story. Biden was one of 88 senators who voted for a bipartisan bill in 1983 to tax up to 50% of Social Security for beneficiaries with income above a certain threshold. That vote came at a time when the Social Security trust fund for retirement benefits was running out of money.
In the early 1980s, President Ronald Reagan, with congressional leaders, convened a bipartisan commission to study the issue. In 1983, that commission issued a report that formed the basis for amendments to the Social Security program. Among the recommendations in the report was that benefits be taxed as income for recipients who had income over a certain threshold.
Congress set that threshold a little higher than recommended, at $25,000 for single people and $32,000 for married couples. That would be equivalent to about $64,000 and $82,000 today, adjusted for inflation using the Bureau of Labor Statistics’ consumer price index calculator.
A Senate Finance Committee report issued in March 1983 said that the bill would assure that those with low incomes wouldn’t pay taxes, but those with “substantial taxable income from other sources” would be taxed on some of the benefits they receive.
The income thresholds weren’t indexed to inflation, though. So, as time went on, inflation would rise but the thresholds would remain the same, effectively lowering the bar that was intended to keep low-income beneficiaries from being taxed and adding more beneficiaries to the tax rolls.
It should also be noted that the thresholds weren’t a hard line above which everyone would be treated the same. Rather, the bill set out a formula with a gradual increase in the amount of benefits eligible to be taxed, which maxed out at half of a recipient’s benefits.
All of the taxes collected on those benefits would go back into the Social Security coffers.
The bill that included that change to the program passed in a bipartisan vote in 1983. Biden was one of 88 senators who voted for it. Only nine senators voted against it.
When Reagan signed the bill into law, he praised the bipartisan effort in his remarks and was joined by members of both parties. “This bill demonstrates for all time our nation’s ironclad commitment to Social Security,” he said.
Today, about half of Social Security recipients pay no federal income tax on their benefits, according to a June 12 report from the Congressional Research Service. When the law was passed, about 10% of recipients owed taxes on their benefits. So, the portion of those affected has risen, although it’s far from including everyone.
So it’s true that Biden voted to tax some Social Security benefits. But the social media posts leave out the fact that the law had overwhelming bipartisan support, wouldn’t apply to all beneficiaries and would only tax 50% of benefits at the upper end of a sliding scale.
“In 1993, Joe Biden was the deciding vote in raising taxes on social security from 50% to 85%.”
In this case, the change was part of a major tax bill that President Bill Clinton had laid out in his State of the Union address in February 1993.
Among its provisions was an increase to the amount of Social Security benefits that could be taxed for some recipients. The way this claim is phrased, though, it sounds like the benefits are subject to an 85% tax rate. That’s not right.
This change to the Social Security program was structured similarly to the 1983 change. It added another bracket to the income thresholds and increased the portion of benefits eligible to be taxed if recipients exceeded the second-tier thresholds. Under this bill, single recipients with income over $34,000 and married couples making more than $44,000 could pay income tax on up to 85% of their Social Security benefits.
The tax bill, which included several controversial changes, was highly partisan. Not a single Republican voted in favor of it.
Biden voted for the bill, along with the majority of his Democratic colleagues in the Senate.
He wasn’t the “deciding vote,” though. The Senate vote was tied, 50-50, and Vice President Al Gore cast the deciding vote.
We addressed another claim related to this issue when Sen. Mitt Romney’s 2012 presidential campaign pointed to Biden’s vote on the 1993 bill. The Romney campaign had failed to mention, as do the current social media posts, that the additional tax revenue would go into the Medicare hospital insurance trust fund — which was rapidly depleting.
So, it’s true that Biden voted for an increase in the amount of Social Security benefits that could be taxed for some recipients, but it didn’t apply to all recipients and he wasn’t the “deciding vote.”
“Now he wants to tax our 401k’s and IRA’s (page 78, Dems’ platform).”
Neither the Democratic Party’s platform, nor Biden’s campaign website, calls for taxing retirement accounts. Rather, they refer to a proposal to equalize the tax incentive for contributions to such accounts, which would increase the tax break for lower-income individuals and decrease it for those with high incomes.
An analysis of Biden’s tax proposals conducted by the Tax Policy Center notes that his plan for retirement savings accounts is similar to an option laid out in a 2012 report from the AARP Public Policy Institute. Currently, contributions to 401(k) aren’t taxed — only withdrawals. The AARP report proposed a flat-rate credit instead of tax-free contributions, which are keyed to workers’ tax brackets and benefit those with higher incomes.
Explaining the effect of that policy, the report said, “consider two taxpayers, each of whom contributes $6,000 to a 401(k) and thus reduces taxable income by $6,000. One taxpayer has high income and faces a marginal tax rate of 35 percent; by contributing to the 401(k), she reduces taxes owed by $2,100 (35 percent of the $6,000 contribution). The other has relatively low income and is in the 10 percent tax bracket, so that the 401(k) contribution only reduces taxes by $600.”
In that example, the more well-off person gets a 35% government subsidy and the less well-off person gets a 10% government subsidy, since the subsidies are tied to their tax rates.
If, instead, everyone who put money into a retirement account received a flat-rate credit — untethered from their tax rate — it would shift more of the subsidies to low- and middle-income workers.
Using a roughly 28% credit as an example, the 2012 report found, “Tax increases would be concentrated in the top decile of the income distribution, while the bottom 90 percent of the distribution would receive, on net, a tax reduction.”
So, introducing a flat-rate that’s lower than someone’s tax rate — 28% versus 35%, to use the examples above — could be cast as a tax increase since that person would be liable for the difference. But that person would still be able to put away money with an effectively lower tax rate than they’d usually pay.
Gordon Mermin, a researcher at the Tax Policy Center who worked on the analysis of Biden’s tax proposals, said in an email to FactCheck.org, “My bottom line is that proposal increases retirement tax subsidies for low and middle income savers and reduces subsidies for certain higher income savers, but to be clear, everyone who contributes to an IRA or 401K still gets a tax break.”
The actual impact of the plan would depend on the details, and we didn’t get a response from the Biden campaign when we asked. But it’s misleading to say that Biden “wants to tax our 401k’s and IRA’s” without any further explanation. In fact, a flat tax credit would result in a larger tax break for lower-income individuals who contribute to retirement accounts.
Editor’s note: FactCheck.org is one of several organizations working with Facebook to debunk misinformation shared on social media. Our previous stories can be found here.
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Sources
Social Security Administration. Report of the National Commission on Social Security Reform. SSA.gov. Jan 1983.
Svahn, John A. and Mary Ross. “Social Security Amendments of 1983: Legislative History and Summary of Provisions.” SSA.gov. Jul 1983.
Social Security Administration. Social Security Amendments of 1983 – reports, bill, debates, and act. SSA.gov. Accessed 15 Sep 2020.
Congressional Research Service. “Social Security: Taxation of Benefits.” Crsreports.congress.gov. Updated 12 Jun 2020.
Social Security Administration. Research Note #12: Taxation of Social Security Benefits. SSA.gov. Accessed 14 Sep 2020.
UCLA Social Sciences Division. “98th Congress > Senate > Vote 53.” Voteview.com. 23 Mar 1983.
Reagan, Ronald. Remarks on Signing the Social Security Amendments of 1983. SSA.gov. 20 Apr 1983.
Clinton, Bill. Address Before a Joint Session of Congress on Administration Goals. 17 Feb 1993.
Altig, David and Jagadeesh Gokhale. “The Budget Reconciliation Act of 1993: A Summary Report.” Economic Commentary — Federal Reserve Bank of Cleveland. 15 Oct 1993.
U.S. Senate. Roll Call Vote 103rd Congress – 1st Session. 6 Aug 1993.
Social Security Administration. MYTHS AND MISINFORMATION ABOUT SOCIAL SECURITY- Part 2. Accessed 14 Sep 2020.
Kiely, Eugene. “Social Security Scare.” FactCheck.org. 3 Oct 2012.
2020 Democratic Party Platform. Approved 18 Aug 2020.
“THE BIDEN PLAN FOR OLDER AMERICANS.” Joebiden.com. Accessed 16 Sep 2020.
Mermin, Gordon B., et al. “An Analysis of Former Vice President Biden’s Tax Proposals.” Tax Policy Center. 5 Mar 2020.
Mermin, Gordon B. Senior research associate, Tax Policy Center. Phone interview with FactCheck.org. 15 Sep 2020.
Gale, William G., et al. “New Ways to Promote Retirement Saving.” AARP Public Policy Institute. Oct 2012.