Good Question: Why Are Social Security Benefits Taxed?


THIS IS WCCO 4 NEWS. MINNESOTA IS JUST 1 OF 13 STATES THAT TAX SOCIAL SECURITY BENEFITS. PART OF ANY TAX CUT PLAN COULD ELIMINATE THAT THOUGH. SEVERAL WCCO VIEWERS EMAILED US WANTING TO KNOW WHY DO WE EVEN TAKE SOCIAL SECURITY BENEFITS. HEATHER BROWN EXPLAINED HOW IT STARTED, AND WHO ALREADY DOES NOT HAVE TO PAY. Reporter: AS ALWAYS, THERE ARE TWO SIDES TO THIS TOPIC. ONE IS THAT PEOPLE HAVE PAID IN ALL THE WAY, SO WHY SHOULD THEY HAVE TO PAY ALL THE WAY? LET’S BE ONE OF THOSE STATES THAT DOES NOT TEXT OUR SENIORS. Reporter: ANOTHER IS THAT MINNESOTA IS ONLY TAXING HIGH EARNERS, AND WE NEED THE MONEY. I THINK ULTIMATELY, THE MOST STRUGGLING SENIORS WOULD BE THE ONCE HARDEST HIT. Reporter: SO LET’S TAKE THE EMOTION OUT OF IT FOR NOW AND TALK NUMBERS WITH THE PUBLIC FINANCE EXPERT AT THE U OF M. WHAT IS MINNESOTA TECH SOCIAL SECURITY BENEFITS? BECAUSE OF INCOME. Reporter: U.S. JAY COULD TUROWSKI. WE TAX INCOME AND THE STATE OF MINNESOTA. Reporter: IN SOUTHERN MINNESOTA, BUT HAVE THE PEOPLE WHO GET SOCIAL SECURITY BENEFITS DO NOT PAY TAXES ON THEM. HERE ARE THE AVERAGES FOR PEOPLE WHO BRING IN LESS THAN $24,000 A YEAR PAY NO TAX. HOUSEHOLD WHO MAKE LESS THAN 58,000 ABOUT 19% OF YOUR SOCIAL SECURITY IS TAXABLE, AND HOUSEHOLD TO BRING IN MORE THAN THAT, TWO THIRDS OF YOUR SOCIAL SECURITY CAN BE TAXED. WE STARTED DOING IT IN 1985. Reporter: RIGHT AFTER THE FEDERAL GOVERNMENT STARTED DOING IT, OUR STATE FOLLOWED THE FEDS, OTHERS DIDN’T. IT WAS CONFORMITY WITH THE FEDERAL TAX, WHICH WE DID IN THOSE DAYS Reporter: OF MINNESOTA WERE TO STOP TAXING SOCIAL SECURITY BENEFITS ENTIRELY, SENATE REPUBLICANS SAID TODAY THAT WOULD SAVE TAXPAYERS $430 MILLION A YEAR. DOES THE MONEY GO STRAIGHT INTO THE GENERAL FUND? IT DOES. Reporter: IS THAT A BIG AMOUNT? IT IS A BIG AMOUNT OF PREP FOR MINNESOTA’S ANNUAL BUDGET IS RIGHT AROUND $25 BILLION.

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