Social Security – the cold hard facts

Posted: October 24, 2006 in Social Security

Couldn’t sleep tonight, so what better way to launch the Social & Politics category I just set up?! Let the intelligent dialogue begin! (NOTE – I edited this post, in the interest of brevity. I added the rest back in as a separate post.)

I despise Social Security. Yup, it’s that simple. I do. Here’s why.

FACT:
SocSec began as a 1% contribution with a matching 1% from employers. As of 2006, the contribution is now 6.2% with a matching 6.2%. That’s right folks, we’re paying SIX TIMES as much into the system as when it was designed. Source is here It’s on Page 2 (aka p104)

FACT:
At its inception, SocSec contributions were capped at the first $3,000 of salary. Today, the cap is $94,000. Adjusted for actual annual inflation from 1935 to 2005, that $3,000 salary would equate to a $43,700 salary today.  So, again, we’re paying disproportionately more than was originally planned – to the tune of more than 100% more.  Source for historical inflation.

FACT:
A variety of federal & state government positions are exempt from SocSec – for instance, teachers.   The reasoning behind this exemption?  These roles offer more favorable retirement programs.  Yet, many of these very same positions still receive at least limited benefits from SocSec. 

FACT:
Effective earnings using SocSec are going DOWN, not up, over time. Check it out here.

FACT:
SocSec actually punishes individuals who are completely independent. Remember any small business is NAILED by SocSec – paying the full 12.4% directly for all self-employed workers. The SBA has some interesting stats that help illustrate how badly the self-employed is getting hosed. Table 2 on page 17 of the PDF shows various self employed vs corporate stats.

FACT:
SocSec will be insolvent in the coming decades. For a worker my age (36), it is likely my benefits will be cut by at least 25%.

So, in summary…

We have a tax that…

  1. is six+ times the rate our grandparents contributed.
  2. is based on DOUBLE+ the maximum salary cap
  3. has double-standardized exceptions & exemptions for particular groups
  4. is actually providing declining returns
  5. will be insolvent in the coming decades

Yes, I despise this tax.

I’ve posted my proposed solution separately.

gb

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