by John Koraska

Revised September 11, 2007

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The Social Security program is primarily funded by a regressive income tax on wage income supporting a broad agenda of progressive public welfare that is more closely linked to charity than it is to equity, the original selling point. The unwarranted gift of charitable Spousal and Survivor benefits distort the Social Security worker contribution/beneficiary ratio (2006 estimate: 3.25/1). Note: This distortion is less misleading than the reported 1/1 employer/employee matching contributions ratio that is altered significantly by tax law that allows employers to deduct all FICA taxes from Corporate Income Tax. (The net ratio is not 1/1. It is more than three to one 3/1). See: The Truth About Social Security

It was explained in article#3 Social Security Tax Reform  how Joe Blow (a single employee) earning $90k pays FIT & FICA taxes of $24295. (27% effective tax rate) and how Corporate expensing of Joe's employment effectively cancelled all taxes paid by Joe. Now let's introduce Joe's dad, Joe Blow Sr.

Joe Sr (married, Single provider household) is retiring this year at age 65 years, 6 months. He has continuously contributed the maximum required by law and his benefit is approximately $22,551. Joe's wife Joyce (non-contributing beneficiary) may receive a spousal benefit of $11,275 (up to 50% of Joe's benefit) by virtue of being married to Joe Sr. The family benefit is $33,826. Joe Sr and wife Joyce have life expectancies of 16 and 19 years, respectively. This means the couple will receive $541,216 (inflation adjusted) dollars for 16 years and Joyce will receive an additional $67,653. (inflation adjusted) survivor benefit. Joe will receive $360,816 by virtue of his contributions, a generous government and a benevolent son. Joyce will receive $248,053. by virtue of being married to Joe Sr, an exceedingly charitable government and a benevolent son. The total SS retirement benefit for this couple is $608869, and that does not include exceptionally generous medical benefits provided by the government and Joe Jr.

It should be noted that if Joe Sr was single his total benefit would be $361k not $609k. The difference may be considered the charitable gift for someone who doesn't need it, didn't earn it, shouldn't get it, and if properly explained may not want it! Stated another way, the spousal/survivor gift to Joyce is MONEY confiscated from her own tax-paying son (Joe Jr) and his peers and transferred to her by an all powerful central government that bears little resemblance to the one established by the US Constitution.

Retiree Benefits Compared to a Young Couple

Compare the retired couple with a young married couple, (John & Jane) working for minimum wage. Gross income for this couple is $21424. ((2080 hours * $5.15 = $10712)* 2) The combined FICA taxes credited to the OASDI-HI Trust funds as a result of John & Jane?s employment is $3278. ($21424*15.3%).

Joe Sr's benefit is a grand more than the combined income of John & Jane. Joyce's benefit (to which she contributed zilch) is higher than Jane's gross income. Consider this extreme example of contrasting realities against the background of a program conceived to provide a secure retirement income to low-wage workers. Don't weep over the plight of our young minimum wage couple. You'll learn in Article 12 EITC, Illegal Aliens and Minimum Wage  that Jack and Jane get all their FICA taxes returned with an Earned Income Tax Credit PLUS a bonus for filling out the paper work. Great system, isn't it?

Now compare Joe Sr to his golfing buddy "Mack the Bachelor". Mack is the same age as Joe Sr and has enjoyed an income continuously in excess of the Social Security (OASDI) cap, ($90k - 2005). Mack might question the morality of a system that has over taxed him, during his entire working life simply because he didn't find a permanent mate. He might also question the justice in a system that provides Joe Sr with benefits that exceed his own by 69% when they paid identical Social Security Income Taxes (Government's use of the word "Contribution" to replace INCOME TAX was chosen to make it appear voluntary). Mack might also want to ask why he has always been required to pay significantly higher Federal Income Taxes (FIT) than married folks with kids who utilize the resources Mack's taxes support.

To add insult to injury, Mack the bachelor has to pay income tax on more of his Social Security benefit than his (married) buddy Joe Sr because the threshold (of SS benefit taxation) starts at $25K of provisional income for a Single taxpayer; while the threshold for a married couple, filing jointly is $32K. Now, Mack questions WHY he must pay a higher percentage of income tax on an equivalent amount of benefits received by his buddy Joe Sr? It's like telling Mack that he has been getting swindled for forty years and since he's used to it, why stop!

There are many other examples of how the tax and welfare system injudiciously injures one party and rewards another for no other reason than it's the law. Compare a married working couple (Jack & Jill) to Joe Sr and Joyce (non-contributing spouse) and to Mack. Joe Sr and Mack have continuously paid taxes up to the ?Cap? ($90k 2005) and receive maximum benefits.

Jack and Jill individually pay less into Social Security; but collectively pay in significantly more. Poor Jack has only earned 80% of the SS Cap during his working life and his less fortunate Janice has contributed 60% of the Cap. This means Jack and Jill have jointly paid in 140% of the adjustable cap during their career; but no provisions in law allows a refund of the amount in excess of the cap, nor does the law allow increased joint benefits based on the increased amount of combined taxes paid.

Also, when the benefits are calculated for Jack and Jill they must make a choice of receiving benefits based on their history of individual average indexed wages or Jill may elect to receive 50% (same as Joyce the non contributing spouse) of Jack's benefit, whichever is higher.

How is it that jointly Jack & Jill pay significantly higher Social Security Income Taxes; but receive significantly less benefits than their wealthier peers? Why are benefits NOT determined on the cumulative total of taxes paid? Benefits based on cumulative taxes paid instead of individual average indexed wages would be even more highly beneficial to John & Jane (our married minimum wage couple) whose future benefits would approximately double if based on equity instead of whatever??? .

The government combined Jack & Jill's incomes during their working lives to extract higher percentages of FIT and FICA taxes, yet, the government (in its collective wisdom) does NOT think it appropriate to combine the FICA contributions when calculating the benefits. This is outrageous. Jack & Jill Pay More and Get Less.

Why doesn't anyone get angry? If a corporation attempted to foster a system such as this on their employees, the Justice Department would attack them with unrestrained fury and the media would go crazy. If another country fostered such a system on its citizens, Rumsfeld would probably attack with "Shock and Awe".

"A government that takes from Peter to pay Paul
can always rely on the support of Paul"

Social Security Freeloaders - (Art#6)