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WORKING MAN'S TAX
CALL IT WHAT IT IS
By: Ed Henry (www.get-tuff.com)
No matter what you might think of Social Security, there's no escaping the fact that, as long as you work for someone else, payroll taxes are going to be deducted from your earnings. Your employer is going to deduct 6.2 percent from the salary he agreed to pay you. He's going to do this whether you like it or not. And he's going to kick in another 6.2 percent in matching funds that he would just as soon give to you rather than the government. In a sense, your employer thinks that he is giving these matching funds to you. It's all supposed to go towards your retirement. All for Social Security.
The same thing happens with the Medicare portion of your payroll taxes. You pay half and your employer pays half of the 2.9 percent that's added to your retirement payments. Added for health care.
That brings payroll contributions to a total of 15.3 percent under today's law. If you happen to be self employed, this is the total amount of whatever you draw that you are supposed to send to the government. If you don't, you run the risk of having that government descend on you full force.
Of course, this money is not going into some vault or savings account where it will draw interest until you reach a certain age. It's being used to pay today's retired, disabled, survivors like the children and wives of working husbands who passed away and, of course, some of the medical expenses of those no longer working. That's why it's called FOASI (Federal Old Age and Survivors Insurance) and NHI (National Health Insurance).
When it's your turn to retire, the people in the workforce will be making payments to you through the government. And they will make those payments at the then current income rates which balance rather closely to what your salary used to be, inflation and other factors considered. The government will make adjustments under what they figure as COLAs or Cost Of Living Adjustments. They can make adjustments to what you receive and what current workers are paying as a percentage of income. You can even argue the specifics if you want, but don't expect to gain anything unless you can prove their accountants wrong.
Your employer does not send a separate check to the government for you and other checks for your co-worker's contributions. He adds it all together and sends one check every month or so. The government receives this lump sum payment and puts it in a common pool called the U.S. Treasury's General Fund. It stays there until checks or wire transfers go out to today's retired, disabled and so forth. They know that 81 percent of the payroll taxes received are for Social Security and the other 19 percent for Medicare.
When you retire, the government will figure out how much you deserve to receive and they'll do this from your history of employment - the annual income you reported when you paid your personal income taxes, with W-2 forms attached. That's all they need to tell how much money you put in from the amount you made each year. It's also an important reason for every working person to send in a tax report even if they don't owe any taxes or make enough to pay taxes.
Payroll taxes are working man's taxes. Every worker pays them. And no one continues to make Social Security payments after their annual salary exceeds $80,000 in a single year. That's the current limit.
The Social Security Administration adjusts factors to meet changes in the population, economy, cost of living, and so forth. You can view a history of these changes by clicking here.
The entire system depends on an increasing population and a larger number of people working year to year. In other words, it depends on a healthy economy and a growing nation.
This is what the government describes as a "Pay-As-You-Go" system or "putting contributions in one end of a pipe and paying out the other end." Both are inadequate descriptions, but what you might expect from bureaucrats who have spent most of their lives in large institutions. What Joe six-pack would just as inadequately call those who never had to work for a living or wonder where their next meal was coming from.
In reality, Pay-As-You-Go is the same way most small businesses in this country operate. If you don't have enough money coming in, then you can't make payroll or expenses and will go under. Only the large well established companies have sufficient capital and credit to survive for any length of time without sales or income. What the government considers a small company is any firm with less than 500 employees, so you can see where their heads are at. And politicians probably spend too much time talking with the larger firms and their representative lobbyists.
Social Security was not an American invention. It started in Germany and Chile had it long before we did. Such a system had been under American consideration since 1917, but it wasn't obviously needed until 1934-35 in the heart of the Great Depression. At that time, no one could dispute the fact that most workers in this country had set nothing or too little aside for a rainy day.
With most of today's workers living paycheck to paycheck, deeply in mortgage and credit card debt, the government tightening bankruptcy restrictions, and a large percentage of the retired depending solely on Social Security, the situation isn't much different today. If we were hit with another depression like the Thirties, most of America's working class would be in bread lines again.
Social Security was never meant to be more than supplemental retirement money. A sort of guarantee that no one who ever worked in this country would be completely destitute when they retire or, since the Fifties, physically unable to work. In the Sixties, under the Johnson Administration, Medicare was added to insure that the retired would be able to pay for minimum health care in our country. One of the only industrialized nations without a national health plan.
Don't confuse Medicare with Medicaid. The latter is a government sponsored program to assist those who cannot afford medical treatment. Medicaid is a welfare program, not an entitlement.
Social Security and Medicare are both a form of socialism that arise out of extreme need. Like unions, they do not mean that we've become a communist country. But they do mean that we've reduced the possibility of being exploited by the extreme right wing. With all of the questionable causes of the Great Depression of the Thirties, none of them propose that it was caused by the American workers.
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