Why Is Social Security Taxed?


Quick Answer

Some Social Security benefits may be taxed on individuals because of amendments to the Social Security law passed in 1983 and enacted in 1984, according to the Social Security Administration. Such amendments were passed because of fears that without them Social Security benefits would not remain viable for future beneficiaries. At first, 50 percent of Social Security benefits could be taxable if the taxpayers made above a certain amount of income from other sources.

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Full Answer

In 1993, other amendments were passed that made up to 85 percent of Social Security benefits taxable if the taxpayer made a certain amount of income from other sources, as USA Today reports. Before 1983, the main reason Social Security benefits were not considered taxable was because the wages and income that funded the Social Security Administration had been taxable, which meant that the benefits that came from those taxes should be considered after-tax income. However, the Greenspan Commission, appointed by President Ronald Reagan to make recommendations on benefits viability, took the example of taxation schemes used on pension funds and suggested that they be applied to Social Security benefits. The recommendations had bipartisan support in Congress.

The 1993 legislation, which increased taxable benefits from 50 percent to 85 percent if above a certain income threshold, met with less support in the Congress, according to the Social Security Administration. The deciding vote to pass the legislation though the evenly split Senate had to be cast by Vice President Al Gore.

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