Social Security, the Election, and Beyond
Social Security, not exactly a hot-button issue this election season, has made an eleventh-hour appearance. Some voters are charging that Sen. Joe Biden twice voted to tax Social Security. Voters might wonder if this is true, and what it means.
According to a verification team that includes Joseph Cordes, professor of economics at George Washington University, prior to 1983 Social Security income was not taxable. In 1983, Joe Biden voted in favor of taxing 50 percent of Social Security. As the professor notes, this was a bipartisan measure, so it’s not quite fair to blame the Delaware Democrat alone. In 1993, on the other hand, another measure increased the amount of taxable Social Security benefits from 50 percent to 85 percent. Sen. Biden and 49 Democrats voted for the measure, with Republicans united in opposition and Vice President Al Gore breaking the tie.
In 2020, some workers who have lost jobs may opt to begin collecting Social Security at age 62, their first opportunity. Workers should understand that taxation of retirement benefits is hardly their only concern. At 62 they get their lowest possible payout, and if they opt to supplement Social Security with earnings from work, the government will deduct $1 for every $2 they earn beyond the limit of $18,240, hardly a princely sum. At full retirement age, 66 years and eight months, the limit is $48,600. Workers are better able to perform at 62 than 66, so the limitations make little sense.
California government workers, by contrast, can retire as early as age 50, with gold-plated defined benefit plans. In some cases they keep on working at a different government job with no penalty whatsoever. The Federal Employees Retirement System (FERS) provides benefits from three sources, a basic benefit plan, Social Security, and the Thrift Savings Plan (TSP), whose contributions are tax-deferred.
If embattled workers thought that benefits package is better than their basic Social Security, it would be hard to blame them. Workers could also be forgiven for thinking that whatever happens on November 3, those inequities are not likely to change.