Social Security Tax

Taxes are a necessary evil in any civilization. In order to keep the government running and pay for goods and services, like police and a defense force, everyone must pay their fair share so that money can be collected to foot the bill, so to speak. Social Security is one such service. The Social Security program helps seniors to be able to live in retirement and also helps the less fortunate who need government assistance for various reasons. While most citizens pay their fair share of the tax, there is a bias in the system towards the very rich. This bias makes the Social Security tax not only a recessive tax, but also one that unfairly burdens the less fortunate with the bulk of the costs. The tax is unfair.

The history of the Social Security Tax is directly tied to the hardships of the Great Depression. To help combat what were seen as economic dangers arising from life in the United States at the time, President Franklin Roosevelt’s Presidential Committee on Economic Security drafted the Social Security Act and sent the act to congress as part of the New Deal (Social Security Administration). The Social Security Act would create a program by which certain individuals, mostly the elderly, would receive payments from the government. The program outlined under the Social Security Act would provide aid to those hit hardest by the financial realities of the Great Depression and the hardships of the future, and also help to give elderly citizens a means for retirement, thus creating more openings in the job market. To pay for this program, the government enacted a payroll tax on workers’ wages, thus the Social Security Tax. Half of the tax would be paid by the worker, and half would be paid to the employer (Social Security Administration).

The amount raised each year has risen with the increase in the number of individuals paying into the system as well as from adjustments from inflation and the rise in wages. Since 2008, the amount of money raised through the Social Security Tax has been in excess of $600 billion (Social Security and Medicare Boards of Trustees). This is a significant increase in the amount taken in when one considers that the total revenue raised for Social Security in the year 200 was close to $400 billion (Social Security and Medicare Boards of Trustees).

The way the tax has been collected has not changed much since its inception in 1937. Employees and employers each pay half of the tax collected through payroll, with the employee’s share of the tax being withheld from their paychecks, while those who are self-employed pay the full tax, but at a slightly lower rate overall (Social Security Administration). As with any tax, there are various exceptions and limitations as to who and what income can be taxed and at what rate that tax can be applied. The original rate for this tax in 1937 was 2%, with both the employee and employer paying 1% each. Through the years this rate has risen to its current rate at 6.2% (Social Security and Medicare Boards of Trustees). Currently, an individual will pay up to 6.2% on their income up to the base rate for taxation. This base rate is the limit by which the government can apply taxes; that is, the government will take taxes out on income up to this amount and not over. As of 2012, the base income cap for the Social Security Tax is $110,100 (Social Security and Medicare Boards of Trustees).

When looking at the far reaching effects of a tax or fee, it is easy to overlook percentages in favor of dollar amounts. It is much simpler to say that someone who paid, say, $2000 into the program did not give as much as a person who paid $5000 into the program. In strict numerical terms, this is correct. 5000 is a larger number than 2000. In terms of income percentages, this issue is not so easy to judge. Under the current system, a person can only be taxed on income equal to or below $110,100. Therefore, a person who makes more than $110,110 would in actuality pay less of a percentage of their total income than an individual who made equal to or less than that same amount. The higher a person’s income above the taxation cap, the less of a percentage of their income they pay into the system. It is thus possible for a person who makes $40,000 a year to pay a higher tax rate than a person who makes $1,000,000 a year. Thus, Social Security must be considered a recessive tax.

Furthermore, one must take into account who in fact will be receiving the benefits of the Social Security Program. It is logical to assume those who have better access to health care and the ability to pay for health care costs will live longer than those who do not. Moreover, the nature of one’s work would also affect health through injuries and bodily strain through manual labor. The wealthier a person is, the more likely they are to live a long life. It is fairly clear that the Social Security Tax affects the poor far more than it does the rich. Even among those under the tax cap, the more money one has, the more one can do to prolong their existence. The sad fact is that the lower an individual’s income, the more the tax becomes detrimental to their daily life and less likely they are to ever receive the benefits of the program they have paid into.

The way the tax affects the poor does not seem fair. The way the tax affects a large chuck on the middle class does not seem fair. In reality, the way the tax treats anyone making equal to or less than $110,100 does not seem fair. Taxes affect everyone. Some people are in a better position to deal with the loss of income which goes into taxes than others. This is a fact of life. This is also reasonable way to do business, so long as everyone pays their fair share; which is not true of the current system. The idea of fairness, in essence, comes down to the idea of equality. In a fair system, no one group should be given an advantage over any other group. As it stands now, the very rich are being treated better than the rest of the nation.

This is an issue that should spark a controversy. One of the fundamental principles citizens of the United States live by is equality under the law. When a group begins to be treated worse or better than other groups, there arises an outpouring of demands to correct the imbalance, so long as they public is aware that something is amiss. In the case of taxes, many do not look into the laws out of apathy or simple ignorance to what the tax code really says. There is no public understanding of how the system works. Without this understanding there can be no controversy.

There must be a change in the system to allow for those who make above $110,100 to be taxed at the same rate as those who make under that amount. It is true that those who make this high amount of money will most likely never see any Social Security benefits, but that point is mute in this case. Social Security is a pay as you go system. This means that individuals who are currently paying the tax and directly funding those receiving benefits (Social Security Administration). Just because one pays into the system does not mean they will ever see the money they paid again. Moreover, who is to say that a situation could not occur where the very rich for some reason lose their money and thus become poor enough to receive benefits? Everyone pays for the military, police and firefighters whether or not they ever have call to use them. Social Security is a public good on par with these services. As such, every person, regardless of their wealth, should be required to pay for that service for the good of society.

Works Cited

Social Security Administration. February 2012. The Official Web Site of the U.S. Social Security Administration. Document.

Social Security and Medicare Boards of Trustees. "Status of the Social Security and Medicare Programs Annual Report." 2011.