Clintonomics Signals More Bad News For Mr. And Mrs. RetireeChristopher Farrell
For years, the tax system has penalized two-earner couples when they get married. In many cases, a dual-career married couple ends up paying more in taxes than they would if they were unmarried but living together. Now, if President Clinton's proposal to hike taxes on Social Security payments is passed by Congress, married senior citizens who enjoyed independent careers will find their Social Security benefits eaten away by another twist on the marriage penalty.
Clinton's plan for slashing the budget deficit includes a proposal to tax up to 85% of Social Security benefits for individuals with incomes and benefits over $25,000 and $32,000 for couples. That's up from the current 50% rate, making it much more likely that being married will push two people above the income levels that make their Social Security benefits taxable.
Take the example of two people over the age of 65, each receiving $16,000 in pension and investment income, plus $9,000 apiece in Social Security benefits, based on their own earnings. If single, neither would pay taxes on Social Security benefits, since neither had incomes above $25,000. But together, their joint income, including benefits, would exceed $32,000, and about $15,000 of their Social Security benefits would become taxable. And their tax bill could shoot up by $2,500 or so. That's a 66% bigger marriage penalty for senior citizens than under current law.
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