Social Security from 2% to 15.3% - Robbing the Poor and Middle Class since 1937

Image credit: http://commons.wikimedia.org/wiki/File:Historical_Payroll_Tax_Rates.jpg



There is no Social Security Trust Fund and every tax dollar collected was immediately spent on wars and other slop.  The SS Trust Fund was left with a worthless pile of IOU's totaling nearly $3 trillion, courtesy of thieving Congress Critters.

For decades, the Social System was nothing but a cash cow for the government because receipts far exceeded disbursements but that changed a few years ago.  The cash cow croaked and SS is running a deficit - meaning disbursements exceed receipts.  This requires the federal government to up the rate of interest it pays on the debt (treasuries) or dip into the general fund to finance SS payment obligations.

If SS was running a consistent surplus for many decades, then why did the government keep raising the tax?  It's a valid question, especially given that nearly $3 trillion vanished into the spending hole. The answer to the question is that both Republicans and Democrats plundered the SS Trust fund to finance wars.  The largest increase in the SS tax included LBJ and Reagan years; not only was the SS tax increased, the Medicare tax introduced in 1966 by LBJ at .7% but was quickly raised to 2.9%. Medicare is also bankrupt, even more bankrupt than SS because Medicare is basically an unfunded entitlement while SS is a plundered and looted entitlement that still generates significant cash.

It's interesting to note how the 2% SS tax grew from 2% to 15.3% and what presidents were responsible for the largest increases in SS-Medicare taxes. LBJ and Reagan were both ferociously loyal to the military industrial complex and both used SS-Medicare taxes to fun the MIC.

[hide]Historical Social Security Tax Rates Maximum Salary FICA and/or SECA taxes paid on[9]
Year	Maximum Earnings taxed	OASDI Tax rate	Medicare Tax Rate	Year	Maximum Earnings taxed	OASDI Tax rate	Medicare Tax Rate
1937	3,000	2%	-	1977	16,500	9.9%	1.8%
1938	3,000	2%	-	1978	17,700	10.1%	2.0%
1939	3,000	2%	-	1979	22,900	10.16%	2.1%
1940	3,000	2%	-	1980	25,900	10.16%	2.1%
1941	3,000	2%	-	1981	29,700	10.7%	2.6%
1942	3,000	2%	-	1982	32,400	10.8%	2.6%
1943	3,000	2%	-	1983	35,700	10.8%	2.6%
1944	3,000	2%	-	1984	37,800	11.4%	2.6%
1945	3,000	2%	-	1985	39,600	11.4%	2.7%
1946	3,000	2%	-	1986	42,000	11.4%	2.9%
1947	3,000	2%	-	1987	43,800	11.4%	2.9%
1948	3,000	2%	-	1988	45,000	12.12%	2.9%
1949	3,000	2%	-	1989	48,000	12.12%	2.9%
1950	3,000	3%	-	1990	51,300	12.4%	2.9%
1951	3,600	3%	-	1991	53,400	12.4%	2.9%
1952	3,600	3%	-	1992	55,500	12.4%	2.9%
1953	3,600	3%	-	1993	57,600	12.4%	2.9%
1954	3,600	4%	-	1994	60,600	12.4%	2.9%
1955	4,200	4%	-	1995	61,200	12.4%	2.9%
1956	4,200	4%	-	1996	62,700	12.4%	2.9%
1957	4,200	4.5%	-	1997	65,400	12.4%	2.9%
1958	4,200	4.5%	-	1998	68,400	12.4%	2.9%
1959	4,800	5%	-	1999	72,600	12.4%	2.9%
1960	4,800	6%	-	2000	76,200	12.4%	2.9%
1961	4,800	6%	-	2001	80,400	12.4%	2.9%
1962	4,800	6.25%	-	2002	84,900	12.4%	2.9%
1963	4,800	7.25%	-	2003	87,000	12.4%	2.9%
1964	4,800	7.25%	-	2004	87,900	12.4%	2.9%
1965	4,800	7.25%	-	2005	90,000	12.4%	2.9%
1966	6,600	7.7%	0.7%	2006	94,200	12.4%	2.9%
1967	6,600	7.8%	1.0%	2007	97,500	12.4%	2.9%
1968	7,800	7.6%	1.2%	2008	102,000	12.4%	2.9%
1969	7,800	8.4%	1.2%	2009	106,800	12.4%	2.9%
1970	7,800	8.4%	1.2%	2010	106,800	12.4%	2.9%
1971	7,800	9.2%	1.2%	2011	106,800	10.4%	2.9%
1972	9,000	9.2%	1.2%	2012	110,100	10.4%	2.9%
1973	10,800	9.7%	2.0%	2013	113,700	12.4%	2.9%
1974	13,200	9.9%	1.8%
1975	14,100	9.9%	1.8%
1976	15,300	9.9%	1.8%
Notes: Tax rate is the sum of the OASDI and Medicare rate for employers and workers. In 2011 and 2012, the OASDI tax rate on workers was set temporarily to 4.2% while the employers OASDI rate remained at 6.2% giving 10.4% total rate. Medicare taxes of 2.9% now (2013) have no taxable income ceiling. Sources: Social Security Administration, [40] and [41], accessed 7 Nov 2013

Source of chart: http://en.wikipedia.org/wiki/Social_Security_(United_States)

Social Security and Medicare taxes are like property taxes - you have the tax rates plus the base or assessment on which they were assessed. 

Medicare did not exist until LBJ created it in 1966 with a tax rate of .6 that was quickly raised to 1.2% by LBJ.  This was on top of LBJ's 16% increase in the SS tax from 7.25% to 8.4%.  Even worse, LBJ raised the base a whopping 63% from $4,800 to $7,800.   It's how LBJ funded the Vietnam War.

But the prize for the biggest SS tax hikes in history go to Reagan who raised the SS tax from 10.16% to 12.12%, in addition to raising the Medicare tax from 2.1% to 2.9%.  But Reagan also raised the base from $25,700 to $48,000, nearly doubling the taxable base by a whopping 86%.

These taxes fell squarely on the poor and middle class who obviously pay the brunt of SS and Medicare taxes. 

Reagan's SS-Medicare tax hikes combined with the increase in the wage base on which these taxes were paid constituted the biggest tax hike on the poor and middle class in US history, AFTER the Federal Reserves' wholesale robbery of the purchasing power of the dollar.

 

After Nixon de-tethered the dollar from gold in 1971, the purchasing power of the dollar rapidly declined and was permanently decimated.  During the Reagan years, the poor and middle class were hit with monster SS and Medicare tax on wage dollars that were buying less and less.  Still, every president and congress since SS was enacted has plundered the SS Trust Fund and left a worthless pile of IOU's.  Reagan, with bipartisan support, managed to royally screw the poor and middle class on a level unheard of in US history.

To put SS tax rates into perspective especially as it pertains to both the rate and the ever increasing  base, the best example is Teresa Heinz Kerry who disclosed her tax returns when hubby John Kerry ran for president.  Teresa Heinz Kerry, who is worth $200 million according to celebritynetworth.com, paid a paltry federal tax rate of 12% on unearned income (dividends and interest) in excess of $5 million, here and here, in 2003.

When the richest folks in America pays much lower tax rates than the poor and middle class, something is radically wrong. 

In America, the minimum tax rate for the poor and middle class starts with a floor of 15.3%, a rate that doesn't include federal taxes, state taxes, sales taxes and various other taxes designed to gouge ordinary working stiffs and the poor.

And if the ordinary folks think that the government is saving their money for them and their future retirement, they are brain dead and delusional.  Yeah, it's an absolute tragedy that damn few Americans even know what the government did with their so-called retirement savings.  Spending SS and Medicare taxes on wars and other slop is just another pathetic example of the thieving powers of government whose only goal is to plunder the people. And plundering the people is the only thing that government is good at.