The Social Security tax was enacted in 1935 with only a 1% deduction on the first $3000 of wages. Today, the tax rate has climbed to 12.4% of the first $106,800 of income, resulting in a 44-fold increase in the total allowable confiscation. So how did we manage to expand the taxes exponentially but also end up with a system destined for bankruptcy?<\/p>\n
There are two main reasons for this debacle. First, thanks to advances in medical care, the life expectancy for Americans has risen from less than 65 years in the 1930s to more than 80 today. The statistics are a bit complicated, but this simply means that the average worker today is more likely to make it to retirement, and likely to draw social security much longer when he does.<\/p>\n
Second\u2014like most government programs\u2014the system was underfunded from the beginning. Forecasters should have been aware of likely changes in life expectancy at the time, but working these assumptions into their models would have resulted in a higher tax rate from the beginning, thereby threatening passage of the bill. Once enacted, the momentum builds and the left can simply \u201ctax the rich\u201d to make up the difference.<\/p>\n
Social Security confiscates 12.4% of one\u2019s wages that could have been placed in a private retirement savings account. Meanwhile, millions of Americans who \u201cplayed by the rules\u201d now expect what they\u2019ve been promised. Current retirees should receive benefits and those close to retirement should be covered as well, although it\u2019s certainly necessary to increase the retirement age and correct flaws in the way cost-of-living adjustments are calculated. However, the real question is how to reform or scale back the program for those who have a ways to go.<\/p>\n
Opting out must be part of the solution. I believe Social Security should be optional<\/em> for those who prefer to save for retirement through private plans. However, I usually get 3 thoughtful questions when I offer this proposal. First, what happens if I invest my retirement funds in commodities and the stock market crashes? This question assumes that the federal government will always be able to meet its obligations, a notion I don\u2019t buy in the first place. Besides, individuals could be required to invest a portion\u2014perhaps one-third\u2014of their funds in \u201csafe\u201d investments such as government securities just in case, and accept<\/em> the risk associated with their other investments.<\/p>\n Second, if those with middle and upper incomes opt out, then who will pay the benefits for the poor? This question acknowledges the fact that social security is really about wealth redistribution anyway. My response? Everyone pays 1%\u2014the original tax\u2014whether they opt out or not. For those who don\u2019t participate, these funds can be used to help cover the shortfall at retirement time.<\/p>\n Third, doesn\u2019t my proposal violate personal freedom by requiring individuals to save for retirement and contribute 1% to a plan they reject? Perhaps it does, to some extent. But I\u2019m a pragmatist. \u201cSocial Security\u201d is as much security for society as it is for the recipient. Without it, some Americans would choose not to save for retirement and would end up on the streets as seniors. Taxpayers would step in at that point anyway. It\u2019s part of personal responsibility to save for times when you cannot work, so I don\u2019t have a problem requiring that people do so, but in their own accounts<\/em>.<\/p>\n Given the choices I propose, most Americans would opt out and Social Security would diminish to a fraction of its current size in the coming decades. Whether or not you like my proposal, we must face reality. The plan guarantees more than it can deliver, and a big part of the solution rests with individuals relying more on personal savings than on Washington. If we only tweak the system, the train will still wreck. When it does, the left will call for massive \u201cmeans testing\u201d as the solution, turning the system into a full fledge wealth redistribution scheme. Every year that passes without a serious solution is another step in that direction.<\/p>\n","protected":false},"excerpt":{"rendered":" The Social Security tax was enacted in 1935 with only a 1% deduction on the first $3000 of wages. Today, the tax rate has climbed to 12.4% of the first $106,800 of income, resulting in a 44-fold increase in the total allowable confiscation. So how did we manage to expand the taxes exponentially but also […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[1],"tags":[],"_links":{"self":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/367"}],"collection":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=367"}],"version-history":[{"count":0,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=\/wp\/v2\/posts\/367\/revisions"}],"wp:attachment":[{"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/battle4liberty.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}