SID SALTER: Yes, some Social Security clients pay income taxes

By Sid Salter

STARKVILLE – The first angry phone call from a reader came a little after 6 a.m. on Wednesday morning. Other communications – emails, more phone calls and messages, and a text or two – would follow.
Here’s why the readers felt the need – in varying degrees of intensity and courtesy – to tell me why they disagreed with one point in my most recent column.
In that column, I sought to make the case that taxing and spending should be the focus of the 2012 presidential and congressional elections based on the fact that over the next 25 years, some 77 million Americans – the vaunted “Baby Boomers” – will begin drawing Social Security checks, collecting Medicare benefits and receiving long-term care under Medicaid.
That fact, in concert with the fact that there are already 67.3 million Americans who are dependent on taxpayers for food, shelter, income, education, health care and other support, seems clear enough. Entitlement programs now account for some 70 percent of all federal spending.
The third leg of the tripod upon which I tried to build my argument was the fact that some 49.5 percent of all Americans pay no federal income tax. To explain how that number can exist, I sought to quantify just what demographics aren’t paying federal income taxes.
First, I cited those with who pay no income tax because they don’t earn income sufficient to incur income tax either through lack of earnings or low earnings combined with standard tax deductions and exemptions.
Then, I cited what this group of displeased readers cited as the offending paragraph: “Social Security benefits are exempt from taxation, which accounts for another 22 percent of senior Americans who don’t pay federal income taxes. Earned income child credits and child care credits exempt another 15 percent of those who don’t pay federal income tax from the tax rolls.”
Readers didn’t just tell me I was wrong, they were angry about it. They wanted me to know in no uncertain terms that they paid taxes their Social Security benefits. Most callers weren’t happy about that fact. The truth is that most Social Security recipients don’t pay income taxes.
Like it or not, the Internal Revenue Service says: “If Social Security benefits were your only income for 2010, your benefits are not taxable and you probably do not need to file a federal income tax return. If you received income from other sources, your benefits will not be taxed unless your modified adjusted gross income is more than the base amount for your filing status.”
Those base amounts are $32,000 for married couples filing jointly and $25,000 for single or head of household filers. The Social Security Administration says that about one-third of all Social Security recipients will pay some tax on their benefits – but only if they have other provisional income that is combined with their benefits to increase their adjusted gross income above the base amounts.
Now, gentle readers, there is my mea culpa. Some Social Security recipients – about one-third – do pay income taxes. Two-thirds don’t. But with the crush of Baby Boomer recipients poised to swell the ranks of Social Security recipients, one can also expect a corresponding increase in the number of non-income tax paying recipients.
Where does that leave us in the 2012 elections? Same conclusion as my last column: That the 2012 federal election debate should center on taxing and spending.
Sid Salter is a syndicated columnist. Contact him at (601) 507-8004 or sidsalter@sidsalter.com.