The benefits tax even causes tax-exempt income to be taxed at a 24 percent marginal rate. The earnings penalty, which was recently eliminated for seniors over age 65 but is still in effect for Social Security beneficiaries age 62 to 64, takes away a dollar in Social Security benefits for every two dollars of wages. Those wages are also subject to the FICA payroll tax. The House has voted to roll the benefits tax back to the 50 percent level that was in place before 1993. The Senate is expected to vote on the House bill later this year.
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