Social Security Taxes
U.S. Senator Bernie Sanders (I–VT) claims it’s an “absurdity” that “Elon Musk, a trillionaire, pays the same amount into Social Security as someone making $184,500.”
IN FACT, SS is already a raw deal for high-income workers, the inflation-adjusted maximum payroll tax is now 10 times the promised maximum, and socialists are trying to make this tax unlimited to cover for the inherent flaws of SS. Here are the specifics:
- During the Great Depression of the 1930s, Congress and Democrat President Franklin Delano Roosevelt instituted programs primarily modeled after the European social welfare programs that began in Germany under Otto von Bismarck, a forefather of National Socialism (aka Nazism).
- One of those programs was Social Security, which they enacted in 1935 with an explicit promise that “the most you will ever pay” in taxes for the program is “3 cents on each dollar you earn, up to $3,000 a year.”
- Since then, various Congresses and Presidents have passed more than 15 laws to increase the payroll tax rate above the 3% promise and raise the maximum taxable wage faster than inflation to cover for Social Security’s financial problems.
- Adjusted for inflation, the maximum payroll tax is now 9.4 times the promised amount.
- Workers who earned average wages and retired at the age of 65 in 1980 recovered the value of their payroll taxes (including interest) in 2.8 years, while for workers who retired in 2003, it took 17.4 years. For workers who retired in 2020, it will take 21.6 years, assuming that SS has enough money to pay scheduled benefits for this entire period, which it is not projected to have.
- The first person to receive SS benefits was a legal secretary by the name of Ida May Fuller who paid a total of $25 in taxes over three years of work, lived to the age of 100, and collected $22,889 in benefits.
- Per the U.S. Treasury, “Social Security benefits are generally redistributed intentionally toward lower-wage workers (i.e., benefits are progressive).”
- Low-wage workers also receive an effective refund of most of their Social Security taxes through the earned income tax credit.
- Per a Congressional Budget Office report on Social Security, “over their lifetimes most high earners receive much less in benefits than they pay in taxes.”
- Despite an explicit pledge from the federal government that people will receive SS benefits “regardless of the amount of property or income” they have, the SS benefits of people with high ongoing incomes are taxed.
- Democrats are lobbying to remove the cap on SS payroll taxes and make them unlimited, as they did with Medicare while breaking Democrat President Lyndon B. Johnson’s promise that the program would cost “no more than $1 a month” per worker.
- Removing the cap on SS payroll taxes would markedly sever the relationship between taxes paid and benefits received, further transforming SS from a social insurance program into a means-tested welfare program.
- Contrary to a common myth, Social Security is not a saving plan but mainly a “pay-as-you-go” program that pays most of its benefits by taxing people who are currently working.
- Contrary to other common myths, the SS Trust Fund hasn’t been looted, Trust Fund operations haven’t changed in any meaningful way since the outset of the program, and no money has been diverted from SS to the SSI program.
- Those myths have enabled creeping socialism in which each generation of beneficiaries takes more of the next generation’s paychecks.
- Social Security is facing insolvency mainly because it operates like a Ponzi Scheme and the ratio of workers paying taxes to people receiving benefits has fallen by three times since 1955 and is projected to fall further.
