Press Releases

Economic Brief

Nov. 7, 2017

Richmond Fed Research Seeks More Efficient Ways to Tax Social Security Benefits

There may be more efficient ways of taxing Social Security benefits, according to the latest Economic Brief from the Federal Reserve Bank of Richmond.

Many seniors pay taxes on their Social Security benefits, and the taxable portion of their benefits rises as their overall incomes increase. This tax structure can impose higher marginal tax rates on seniors even if their other income sources are relatively modest. These higher marginal rates, in turn, can determine whether seniors decide to retire or continue working. Research by John Bailey Jones of the Richmond Fed and Yue Li of the University at Albany, State University of New York, suggests that several policy alternatives — including taxing benefits like regular income — are more likely to keep seniors in the workforce and to generate more revenue for the Social Security Trust Fund.

The Richmond Fed’s Economic Brief series provides web-exclusive essays on current economic issues and trends. Sign up to receive an email notification when a new essay is posted.


As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District—including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia—to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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