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Because of the way Social Security benefits are taxed, many middle-income retirees face a "tax torpedo."

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Not indexing to inflation is a sneaky way of boosting taxes. Lawmakers can count on growing federal revenue without the politically uncomfortable act of repeatedly voting for those increases.

The taxes are based on combined income, which is a taxpayer’s adjusted gross income, plus any tax-exempt interest (such as interest on mutual bonds) and half of her Social Security benefit. Based on that:

– Single people with combined income over $25,000 a year, or couples with over $32,000 a year, face taxes on up to 50 percent of Social Security benefits.

– Single retirees earning over $34,000 and couples earning over $44,000 may pay taxes on up to 85 percent of benefits.

Because of the way Social Security benefits are taxed, many middle-income retirees face a “tax torpedo,” where their marginal tax rate can more than double. (If you’ll have retirement savings of roughly $200,000 or more, consider talking to a tax professional or financial planner about how and when to claim Social Security benefits to minimize the tax effects.)

In many cases, we’re punishing people who saved for retirement. That isn’t fair, and it isn’t smart.

So we should demand Congress index Social Security taxation to inflation, right? Based on the 1983 threshold numbers, that would ensure that only singles making over about $64,000 year, and couples making over $82,000 a year, would have to pay taxes on their Social Security income.

If only it were that simple.

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