tag:blogger.com,1999:blog-6318055043707993918.post1163750225329811820..comments2024-02-20T02:12:18.090-05:00Comments on THE WANDERING TAX PRO: RANDOM THOUGHTSRobert D Flachhttp://www.blogger.com/profile/06034127763662917220noreply@blogger.comBlogger1125tag:blogger.com,1999:blog-6318055043707993918.post-87042805796804682212011-07-21T11:03:11.285-04:002011-07-21T11:03:11.285-04:00"Payments to Social Security are contribution..."Payments to Social Security are contributions to a retirement and disability fund."<br /><br />No they aren't. They are payments to a "pay as you go" system. "In this context, it would be most accurate to describe Social Security as a transfer payment--transferring income from the generation of workers to the generation of retirees--with the promise that when current workers retiree, there will be another generation of workers behind them who will be the source of their Social Security retirement payments." (http://www.ssa.gov/history/ponzi.htm)<br /><br />The social security trust fund has enough assets in it (in the form of treasury securities) to pay for about 4 years of payments. Your payroll taxes go to pay current recipients. Any promises of future payments to you (and there really are none) are not backed by any actual assets. If you are going to describe that as a savings account, then it is a Bernie Madoff type savings accounts. However, it is probably more accurate to describe it as a regressive tax combined with a social welfare program, since unlike Bernie Madoff, the government doesn't really hide the fact that there's no real trust fund.<br /><br />"Individuals who pay into Social Security will receive a pension for life upon retirement, with benefits also available to surviving spouses and children, and are eligible to receive benefits if they become permanently disabled." No, we might receive a pension for life upon retirement. Or Congress might raise the age beyond our life expectancy. Or Congress might implement means testing. For those of us under the age of 40, this is quite likely, actually. And the payments aren't determined pro-rata based on the contributions. People with low income will receive much more than they put in. People with high income might not even get back what they paid in.<br /><br />And that's just social security. Medicare tax is even more obviously a tax, because what you receive has almost nothing to do with how much you've paid in. If medicare taxes are not taxes, then what about property taxes which are used to pay for parks and libraries? Would you say that these are not taxes, but are actually membership dues?<br /><br />You're right that FICA is not an income tax. It's more accurately described as a payroll tax or maybe an earned income tax. At least, this is true until 2014 (I believe that's the year), when medicare taxes start being charged on unearned as well as earned income.Anthonynoreply@blogger.com