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The first Social Security retirement check was issued to Ida M. Fuller on January 31, 1940, for an amount of $22.54. She had paid SS taxes a little less than three years. She died Jan 27, 1975 at 100 years old. It’s a pretty good bet she didn’t pay for her own benefit.
But that is not the point. The point is Social Security has worked quite well paying benefits for 85 years. The is no justification to attack it. There is no reason to screw it up now.
The SSA, estimates that about half of the population aged 65 or older live in households that receive at least 50 percent of their family income from Social Security benefits and about 25 percent of aged households rely on Social Security benefits for at least 90 percent of their family income.”
All the rhetoric about its future, it being a scam, a Ponzi scheme, I could do better investing the taxes myself, the money was stolen, I paid for my benefits is noise, nonsense.
Tens of millions of retirees, surviving spouse, ex-spouses, dependent children and disabled adults and children depend on the program.
Social Security is essential to the economic and social wellbeing of the United States.
A form of SS is not unique to the US. Well over 100 countries have similar programs. Many pay higher benefits replacing more than 40% or so of pre-retirement income on average. In many cases worker taxes to fund their program are higher than in the US.
For reasons unknown to me, many Americans can’t make the connection between paying taxes and the services and programs we want and need. There are those of us who don’t use some programs so don’t see the need to pay taxes. Seniors against property taxes comes to mind.
To illustrate sharing costs, New Jersey now charges owners of electric vehicles and extra $250 when they register their vehicle each year. Why? Because they don’t pay the gasoline tax that funds road maintenance. I bet there are EV owners who see that as unfair.
This is a society of 340 million very different people, people with varied abilities and needs. There are winners and losers, doers and takers, and that will never change. But it would be nice to think we are also a functioning, caring society.
This column on Social Security from the Conversation was cited in a Wall Street Journal newsletter this morning: Social Security’s trust fund could run out of money sooner than expected due to changes in taxes and benefits
Seems very similar to what I said.
Apparently NJ is one of only 5 states that funds it’s road infrastructure needs 100% (or basically 100% for 2/5) through road taxes like gas tax, fees, and tolls. It seems they’re setting the example for responsible budgeting and taxation, at least in that department. My own state doesn’t even cover 50% 😬
Investopedia has some good explanations on what communism and socialism is and their differences. Also, the Nordic model. Things like SS, educational/university support, union activity, healthcare, infrastructure projects, etc. are always bunched together and deemed as ‚nasty socialism’. I live in Germany, the days of state-owned corporations are long over (except minority stakes in VW, railroad, communal energy, etc). We pay our normal income taxes (progressive, with SS%, unemployment %, disability, infrastructure tax), we pay property tax but only a few thousand a year for a house – not 30,000/yr like in NJ, we pay 50/50 for healthcare (you can also choose private if you make above a certain amount, we pay for university (several thousand a year, housing costs as well if your kid goes/makes the grade), if the road in front of you house needs reaphalting, the house owners co-pay.
The model where you have a democracy, rule of law, private ownership of production and some social services and regulations to mitigate the worst impulses of capitalism is a mixed economy/social democracy. Sounds a lot like the US, no?
Yes, it does and Scandinavia too.
That $30,000 a year in NJ for property taxes does happen, but you need quite a large house. They average is more in the $12,000 to $13,000 range. Still too high, on the plus side most of those taxes go to the schools.
Our problem now is too many people have been convinced taxes are bad, they should pay less or none, and some groups should be excluded. They make no connection to what taxes provide in a society.
Yes, you‘re right, $30,000 was many years ago in East Brunswick. Well known and high achieving school district back then at least.
Dick, I think you just hit on the answer to your own question as to why people get upset about taxes. “Still to high, on the plus side most of these taxes go to the schools.”
The schools are TERRIBLE and GETTING WORSE NOT BETTER. I have 24 and 22 year-old sons who went to both private and public schools, and the public schools were not very good, and we pay $12K a year for a 2800 sq foot house in the burbs in Seattle-metro area.
When you pay the huge gas taxes for “the roads” and they are filled with potholes and take a cast of thousands to hang a traffic light, it tends to lead you to think you’re getting the short end of the stick.
I’m not fighting against your point, I am pointing to your own words as the answer to your own question.
Seattle area tax rate is roughly 1%, so that puts your home at ~$1.2m. 12k is sounding pretty reasonable, and it’s not just funding schools, but also emergency services, pipes for sewage and water, community amenities, etc.
Federal gas tax is 18¢/gallon, Washington is 50¢/gallon. Not low, yet Washington still only funds about 80% of it’s road infrastructure needs through its associated road taxes (gas tax, fees, tolls, etc.) per data from the Tax Foundation.
I do see what you’re getting at here though, which is the disconnect between higher taxes and (apparently) lower service. We tend to think that as we pay more we should get more. I think it says a lot about the society we have built that our costs are rising and our perception of service is declining. What’s going on there?
Well, not actually. The quality of schools varies greatly across the country and districts. The states with the highest rated school systems have the highest taxes – NJ and Mass among them compared with say Mississippi and Alabama.
However, educational performance and quality is at the local level, local involvement and depends greatly on family support and involvement by parents. If a system is not very good and is allowed to continue whose fault is it? I have relatives who teach in an inner city school system. Last year at the annual open house for parents to meet and talk with their children’s teachers, NOT ONE parent showed up. That’s the problem in many poor performing districts.
I drove the length of I 95 down the East coast this winter and the amount of road construction was incredible. So something is being done.
There is and always has been inefficiency in government and always will be, but the perception that tax dollars are widely misused, wasted is wrong. After all, who is government? Our friends, neighbors, possibly relatives run our governments. It is not an independent entity.
Not a political statement as both parties are ridiculously egregious in their spending, but I don’t think people have that many issues paying taxes, I think they feel their hard earned money is being wasted in a monumental way.
I don’t think EV owners feel an additional registration fees to account for gas tax not paid at the pump is unfair. I do think that there is an unfairness with the amount EV owners are penalized for owning an EV.
The 2024 average miles driven by ICE automobiles was 14,200. The $250/year paid by EV owners in New Jersey (gas tax $0.449/gal) is equivalent to 556.7 gallons of gas. Or, based on the ICE average annual miles driven, a car that gets 25.5 MPG. But the average EV travels even fewer miles per year than its ICE counterpart at 12,400 which means average EV owners are paying a gas tax on par with a car that gets 22.25 MPG (for reference, no judgement, a Ford F150 is rated at 23 MPG combined).
A more fair system would be to pay tax on a cost/miles driven, then EV owners would have a say in the amount of tax they are required to pay just like ICE drivers have by purchasing a more efficient car or driving fewer miles. But I imagine if all drivers had an annual accounting of their gas tax, they would think it’s unfair.
It would be more fair to have higher fees based on vehicle weight, on top of miles driven. Heavy vehicles do exponentially more damage to road surfaces than lighter vehicles do, and since EVs are generally quite heavy I think it makes some sense for them to pay a little above your calculation for miles driven. And frankly, the gas tax is in the same boat as FICA taxes these days. It only pays for a portion of the costs it is meant to pay for.
It hasn’t been raised in over 30 years. Another irresponsible in-action by one Congress after another.
Make SS solvent:
Increase FICA tax by 3% (2% on employers, 1% on workers)
Add new state employees to the system
Apply FICA tax to IRC Section 125 cafeteria benefit plans
Means test future COLAs
Annually and automatically adjust FICA rates and taxable wage each year based an actuarial determined funding needs.
Fixed-permanently!
This would provide 140% of what’s needed. I’d also continue taxing benefits but inflation adjust it, it’s catching way more people than originally intended.
(Aside, I increased FICA by the amount I thought was politically viable)
140%? Wouldn’t that be over-funding the program then? I thought the goal was just to get the funding to 100%.
There are real advantages to having a robustly funded retirement system in place. Consider the backdoor advantage of purchasing treasuries at that level as a backstop on how much debt the country manages (it’s better when we owe ourselves, the interest payments, especially when those monies tend to go to people that then spend it all).
But I’d leave it to the actuaries and economists to figure out the most beneficial levels (too much accumulation could put a damper on things).
Probably, but the trust needs to be built up again just like in 1983.
Exactly. I think that SS has a more important role in the economy than is generally talked about. If we’re strictly buying US Treasuries, overfunding also provides a built in market which too has benefit.
I’d defer to actuaries and economists on exactly how much we ought to accumulate, you can easily turn the knobs down to some smaller number.
Increase the age is a bit unfair because increasing life expectancy does not apply to all segments of the population equally.
I do not support any changes that move SS toward more of a welfare program. While being fair, we need to be sure everyone participates on a relative equal basis. That’s why when I replied to David I talked about lower bend point percentages if all wages are taxed. I think it wrong for anyone to pay and get nothing for those taxes. Keep in mind using higher wages hits the upper middle class, not the true wealthy who don’t get paid a wage or salary. Last I checked. Buffet has a salary of $100,000 so technically he already pays on all earnings.
I also think employers should pick up more than half given many abandoned DB plans, save money with 401k plans or have no plan. In addition, allowing the workforce to retire is a plus for many if not most, employers who benefit from that turnover.
Employee turnover benefits everyone, a hidden value of SS.
I have no problem with employers paying more, I just don’t think that’s got a chance at happening.
I agree about adding benefits to the calc if we raise the taxable levels. I’d add new bends, but the calculator I used wasn’t that sophisticated.
What you say about Buffet very true, but I’m not sure how we address that without creating different problems. One of my pet peeves, the insane complexity of the US tax code and how it harms the nation. I’ll leave that to another day 🙂
Thanks Dick for writing the hard truth. I would add to your list drop the income limit on FICA taxes.
But only if there is credit for those earnings in the benefit calculation. For example, For 2025, the bend points are $1,226 and $7,391. The primary insurance amount is calculated as 90% of earnings below the first bend point, 32% of earnings between the two bend points, and 15% of any earnings above the second bend point. If all earnings are taxed then a new bend point should be added with a percentage credit of say 10% of those earnings.
My overall concern is if it’s fair to make the fix entirely the burden of current workers when those of already collecting are benefiting from the years of inaction to fix the problem when we should have paid higher taxes. Hence the COLA means testing applied to existing retirees based on MAGI, including Roth income.
Dick, have you read anything by Jessica Riedl from the Manhattan Institute? She does a lot of stuff with taxes, federal budgets, and social security—including your favorite topic of how raising the SS tax income cap won’t solve any problems. I think you, and maybe some other HD readers, would appreciate her approach getting to the heart of funding issues without being concerned about political affiliations.
No, but I will look
This nationwide survey also finds that 87 percent of Americans agree that Social Security should remain a priority for the nation no matter the state of budget deficits, and this support holds strong across party affiliation.
Does that mean we’ve passed the test (87 is a solid A in terms of popularity) on being a functioning caring society?
I entirely agree – of course I grew up in the UK, which no doubt some Americans would consider socialist. Taxes are a necessary part of civil society, and I, for one, don’t want to try living in an uncivil one.
I have observed that many, perhaps most these days, who throw around socialism and socialist don’t even know what it actually is and isn’t.
Talk about a universal health insurance systems and it’s called socialized medicine. And yet Medicare has served us ancients quite well for 87 years.
Connie and I have used it since 2010 and never once did “government” interfere in our health care or couldn’t we receive health care when and where we wanted and needed.
I’ve received net negative reviews for this fact (sound familiar Dick?), but year after year the happiest countries are the Scandinavian countries. Is it because of the long, dark, cold winters? No, it’s because despite being Socialist societies, and pay high taxes, but they are taken care of from cradle to grave by society in general, which results in less stress. They also have better health, with a lower healthcare expenses.
Many people use the words socialism and communism interchangeably.
Dan, The lines do get a little blurred when, for years, Bernie Sanders has describes himself as a Democratic Socialist.
That does not, in any way, make him a Communist. You might find this enlightening. For instance:
“As Sanders has explained on the campaign trail, wealthy countries in Scandinavia already offer things like free higher education and universal healthcare, while they have also taken major steps to curb the use of fossil fuels and have turned to renewable energy sources. The senator’s stated political goal is to use the democratic process to transition the country more toward such standards while reducing growing social inequality.”
I especially like your final paragraph. No matter what their politics, people from each side have good ideas, and seeking common ground is our best hope for the future.
Jack,
You’re wrong 🙂
Only the people on MY side are good and kind and smart and ethical.
The people on the OTHER side are evil and mean and stupid and criminal.
Winston, you’ve captured the zeitgeist.
Thank you for your steadfast defense of taxes and social security! Government services (both at the federal, state, and local level) are what keeps society running and are far to valuable to squander!
I’ve always thought of taxes in a unique way. It is a welcomed obligation to contribute and become a part of a larger society that cares about its members. The fact that we also benefit directly, via SS or better roads, is a bonus to being part of that greater community.
I agree. I don’t like paying taxes anymore than others, but the need and logic is quite clear. Tax collectors have gotten a bad wrap forever, even in the Bible.