Bill Text: NJ SR122 | 2024-2025 | Regular Session | Introduced
Bill Title: Urges President and Congress to exempt Social Security benefits from federal income tax.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced) 2025-01-14 - Introduced in the Senate, Referred to Senate Health, Human Services and Senior Citizens Committee [SR122 Detail]
Download: New_Jersey-2024-SR122-Introduced.html
Sponsored by:
Senator OWEN HENRY
District 12 (Burlington, Middlesex, Monmouth and Ocean)
SYNOPSIS
Urges President and Congress to exempt Social Security benefits from federal income tax.
CURRENT VERSION OF TEXT
As introduced.
A Senate Resolution urging the federal government to exempt Social Security benefits from federal income tax.
Whereas, The Social Security Act was enacted on August 14, 1935 to provide assistance to the nation's elderly population by establishing a federal social insurance system; and
Whereas, The first Social Security benefits were paid in 1937 as one-time, lump-sum payments, but in 1940, benefits were instead paid out in the form of monthly checks mailed to qualified senior citizen recipients; and
Whereas, Over time, eligibility for Social Security has incrementally broadened from originally providing benefits only to retired workers over the age of 65 to now paying benefits to survivors of deceased workers, dependents of retired workers, disabled workers and their dependents, and early retirees; and
Whereas, The estimated average monthly Social Security retirement benefit payment for January 2024 was $1,907, which equates to roughly $23,000 a year; and
Whereas, As of June 30, 2024, nearly 90 percent of individuals aged 65 and older receive a Social Security benefit, with those benefits representing approximately 30 percent of their total income; and
Whereas, Retired workers and their dependents represent just 78 percent of total Social Security benefits paid, as nearly a quarter of all benefits go to disabled workers and their dependents as well as survivors of deceased workers; and
Whereas, Prior to 1984, Social Security benefits were considered exempt from federal income taxes; and
Whereas, Following the recommendations of the National Commission on Social Security Reform in 1983, federal legislation was enacted to permit the inclusion of up to 50 percent of a beneficiary's Social Security benefit as taxable income under the federal income tax; and
Whereas, Congress later enacted federal legislation in 1993 to tax up to 85 percent of a beneficiary's Social Security benefits if the beneficiary's total income exceeds certain thresholds; and
Whereas, Currently, single filers with combined gross incomes between $25,000 and $34,000 are required to pay federal income tax on up to 50 percent of their Social Security benefit, whereas single filers with combined gross incomes greater than $34,000 are required to pay tax on up to 85 percent of their benefit; and
Whereas, The income thresholds established during the Social Security reforms of the 1980's and 1990's have not increased since enactment and are not tied to inflation; and
Whereas, Despite the federal taxation of Social Security benefits, 41 states and the District of Columbia do not levy a state personal income tax on Social Security payments; and
Whereas, The New Jersey Constitution expressly prohibits levying a state personal income tax on payments received under the federal Social Security Act, the federal Railroad Retirement Act, or any similar federal law subsequently enacted which substantially reenacts the provisions of those laws; and
Whereas, The exemption of Social Security benefits from income taxation provides much needed relief to many of the State's most financially vulnerable residents; and
Whereas, It is estimated that one-third of the private sector workforce has no access to private pension coverage and, amongst those individuals without access to an employer-sponsored plan, half do not have any retirement savings; and
Whereas, Although those who rely on Social Security for their retirement income have contributed more than their fair share through years of payroll and income taxes, the federal taxation of Social Security benefits unfortunately serves to reduce the value of these benefits when they are needed most; and
Whereas, By placing an additional tax burden on Social Security recipients, the federal government fails to appreciate how essential every dollar of a Social Security payment is to many Americans; and
Whereas, Exempting all Social Security payments from the federal income tax would put more dollars back in the pockets of many hardworking Americans at a marginal cost to federal income tax revenues; and
Whereas, Federal legislation has been introduced by Representative Jefferson Van Drew (NJ-2) in the House of Representatives of the United States Congress, as H.R. 9359, The Social Security Tax Freedom Act, to exempt Social Security payments from the federal income tax; now, therefore,
Be It Resolved by the Senate of the State of New Jersey:
1. This House urges the President and Congress of the United States to enact legislation exempting Social Security benefits from federal income tax.
2. Copies of this resolution, as filed with the Secretary of State, shall be transmitted by the Secretary of the Senate to the President of the United States, the Majority Leader of the United States Senate, the Speaker of the United States House of Representatives, and each member of Congress elected from this State.
STATEMENT
This resolution urges the President and Congress of the United States to enact legislation exempting payments of Social Security benefits from federal income tax.
The Social Security Administration was established in 1935 to provide general welfare to the country's elderly population through a federal social insurance system. The payments, commonly referred to as Social Security benefits, were first paid out in 1937 to retired workers over the age of 65. Since then, the breadth of Social Security benefits has expanded to also provide for payments to early retirees, disability payments, survivors benefits, and payments to dependents of beneficiaries.
The average monthly Social Security retirement benefit is about $1,900, which equals roughly $23,000 in annual gross income for a beneficiary. Almost 90 percent of individuals aged 65 or older in the United States receive some form of Social Security benefit, with these benefits representing approximately 30 percent of their total annual income. Additionally, over 20 percent of Social Security beneficiaries are not retirees but rather recipients of disability payments, survivor's benefits, or dependent's benefits.
Prior to 1984, Social Security benefits were considered exempt from federal income taxes. Under current federal law, single filers who file a federal income tax return and have combined gross income greater than $25,000 are required to pay federal income tax on up to 50 percent of their Social Security benefit. Single filers with combined gross income greater than $34,000 are required to pay federal income tax on up to 85 percent of their benefit. These income thresholds have also not been adjusted to account for inflation occurring since the 1990s.
While Social Security benefits have been treated as taxable income under the federal personal income tax since 1984, the New Jersey Constitution expressly prohibits levying a state personal income tax on Social Security benefits. In addition to New Jersey, 40 states and the District of Columbia do not levy a state personal income tax on Social Security payments. By placing an additional tax burden on Social Security recipients, the federal government fails to appreciate how essential every dollar of a Social Security payment is to many Americans.
Legislation has been introduced in the House of Representatives of Congress that would exempt payments of Social Security benefits from being treated as taxable income. H.R. 9359, The Social Security Tax Freedom Act, introduced by Representative Jefferson Van Drew (NJ-2), would exempt Social Security payments from the federal income tax. Because many New Jerseyans who are currently recipients of Social Security benefits have gross incomes greater than $25,000, the federal government should exempt all such payments from federal income tax in order to provide greater financial security for those who rely on the federal social insurance program. Exempting Social Security payments from the federal income tax, regardless of a beneficiary's gross income from other sources, would provide more assistance to hardworking Americans.
