78-01-B8
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Social Security
TranscriptA couple of months after this year's elections the social security tax will start climbing again, till, by 1987, it will be three times what it is now for employer and employee. A rate of more than seven percent will be applied on all earnings up to $42,600. One nice touch I must admit was putting off the actual increase until after the election. After all, you know they must have done that for our benefit. With our interest centered on the candidates we wouldn't want to be bothered by trivialities such as tax increase. This could even explain why the cut in benefits from 44 percent of earnings down to 41 percent won't take place until 1984. The bill-signing ceremony in Washington was well covered by television so we saw all the congratulations, the back-slapping and hand-shaking. Sure they were happy--they don't pay any social security tax. This $250 billion, 10-year tax increase will do nothing but stave off for a few years the collapse of the social security system. By its own admission, the program is 17 trillion (yes, trillion) dollars out of balance. What happens when those few years are up? Another tax increase? At what point do we face up to reforming the system and making it actuarially sound? I have a copy of the official announcement of the beginning of social security November 24, 1936. It is addressed to us the citizens and explains how the program will function, "if you work in some factory, shop, mine, mill, store, office or almost any other kind of business or industry you will be earning benefits that will come to you later on." The tax started at one percent of earnings up to $3,000. And, it was explained how the rate of tax would increase by half a cent every three years until it reached its ultimate ceiling of three percent, but only on $3,000 of earnings. Then came this promise. "That is the most you will ever pay". We were also promised that our dollars would go into a fund where we were guaranteed at least three percent interest, therefore we would always get back more than we paid in and more than we could get by putting our money into any kind of private investment. I'm sure they meant those promises, but they never kept them. Right now more than half the people paying into social security will get less than they pay in-- possibly as little as half. For more than half the work force the social security tax is bigger than the income tax and, remember, it is not deductible for income tax purposes--you pay a tax on a tax. Truth is if we could invest you and your employer's share of the social security tax in savings or insurance we could make a much better return than that promised by social security. It was never going to cost more than three percent on $3,000. Now it's going to cost more than seven percent on $42,600 and it is, in effect, bankrupt. This is Ronald Reagan. Thanks for listening. |
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