“Earned Benefits”
Democrat House Leader Hakeem Jeffries claims that “Social Security and Medicare are not entitlement programs” but “earned benefits.”
IN FACT, the Social Security Administration repeatedly refers to SS as an “entitlement,” and the taxes that individuals pay for SS and Medicare have become increasingly disconnected from the benefits they receive. Here are the hard facts:
- Politicians have raised the SS payroll tax rate from 2.0% in 1949 to 12.4% currently.
- Politicians have raised the inflation-adjusted taxable maximum for SS payroll taxes from $40,000 in 1949 to $176,000 currently.
- Politicians enacted SS with an explicit promise that “the most you will ever pay” in taxes is “3 cents on each dollar you earn, up to $3,000 a year.” Adjusted for inflation, the maximum SS payroll tax is now 9.1 times that amount, and politicians have imposed additional taxes to fund SS.
- For workers who earned average wages and retired at the age of 65 in 1980, it took 8 years of receiving old-age benefits to recover the value of their payroll taxes, including interest). For workers who retired in 2003, it took 17.4 years. For workers who retired in 2020, it will take 21.6 years. This assumes that SS has enough money to pay scheduled benefits for the entire period, which it is not projected to have.
- Unless SS payroll taxes are increased by another 25%, SS is due to become insolvent in 2035.
- SS pays retired low-income workers significantly higher rates of return on their payroll taxes than high-income workers.
- Low-income workers receive an effective refund of most of their payroll taxes through the “earned income tax credit.”
- When Democrat President Lyndon B. Johnson proposed a “hospital insurance” (i.e., Medicare) program for senior citizens in 1964, he said it would cost people “no more than $1 a month during the employee’s working career.”
- Adjusted for inflation, $1 in 1964 equals $10 in 2025, but the Medicare payroll tax is now technically unlimited and costs workers 2.9% of their wages up $200,000/year and 3.8% thereafter. Workers who earn $1 million/year pay about $3,000/month for this tax.
- Medicare payroll taxes currently fund only 34% of Medicare’s expenses, while 46% is funded by general revenue taxes.
The popular myth that SS and Medicare pay you back what you put in has enabled creeping socialism in which each generation of beneficiaries feels entitled to more of the next generation’s earnings. The same is true of the common fiction that SS has been looted.
