Should we rethink how we tax Social Security benefits?
Taxation of retirement income is an important issue. People with significant 401(k) holdings are going to owe the government a meaningful portion of their pile in taxes.
In the process of calculating how large that tax burden might be, it was necessary to review the taxation of Social Security benefits.
The taxation of benefits was introduced in the 1983 Amendments to the Social Security Act. The consensus at the time was that the tax treatment of Social Security benefits should match that of private pensions. Under the rules for defined...