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.

Congress Plundered Social Security, it's Broke and Congress Critters Panic

IN a shockingly rare piece of raw truth, The Huffington Post actually disclosed the truth about Social Security although in a weirdly defensive and convoluted way.

Pay Back the Money Borrowed From Social Security

While the "Puff Post" piece does indeed puff up the Dems and entitlements while vigorously defending the SS program, it does manage to make a very critical point.

Pay Back Social Security -- The Government Has Borrowed More from Social Security than any Other Entity or Foreign Government

...the government has borrowed more from the Social Security surplus than it has from any other source in the world, including China. As a result, Social Security now "owns" nearly 18 percent of the federal debt, making it the largest single holder of US debt. The government owes almost twice as much to Social Security as it does to China and Hong Kong.

Why aren't the opponents worried about paying back Social Security -- why aren't they talking about repaying this debt to the American people?  According to the U.S. Treasury Department's "Monthly Statement of the Public Debt of the United States" (9.30.10), the total debt was $13.562 trillion and was held as follows:  

US Holders of Debt

42.1 % -- US Individuals and Institutions

17.9 % -- Social Security Trust Fund 

6.0 % -- US Civil Service Retirement Fund

2.1 % -- US Military Retirement Fund 

Foreign Holders of Deb 

11.7 % -- Oil Exporting Countries

9.5 % -- China and Hong Kong

6.3 % -- Japan

1.4 % -- United Kingdom

1.3 % -- Brazil

1.6 % -- All other foreign countries 

House Republican Majority Leader Eric Cantor (R-VA) provided some insight to their Social Security views in a recent NPR interview when he was talking about Social Security and said, "We are going to have to come to grips with the fact that these programs cannot exist if we want America to be what we want it to be."

If the American public were asked about what priority should be placed on the debt owed to Social Security, we have no doubt that they would resoundingly say: "Pay Us Back -- pay back the money borrowed from Social Security!"

Fedzilla and Congress just haven't plundered Social Security to fund its wars and spending addiction, they also plundered the US Civil Service Retirement Fund and the US Military Retirement Fund.

The government has been plundering the Social Security Trust Fund ever since SS was created in 1935.  For many decades, the government dipped its grubby fingers into the SS Trust Fund because its payouts were far less than the receipts.  Congress literally stole the SS Trust Fund money and left a big pile of worthless IOU's that total at least $3 trillion.

In recent years, the situation has now reversed itself - SS outflows are exceeding inflows and over $200 billion in general revenue appropriations were required to fund the shortfalls in recent years, here, and pay recipients.

Congress has now lost the slush fund that it stole from the people and lavishly spent on wars, corporate welfare and other entitlement programs.  Now everybody is in an absolute panic.  However, the cruel reality of the Social Security system lingers.

Yes My Fellow Americans, Congress Really Did Steal Your Social Security

Moreover, Congress Critters have a pension plan that has been dubbed the “Golden Fleece Retirement” because “Congressional pension benefits are 2-3 times more generous than what a similarly-salaried executive could expect to receive upon retiring from the private sector”, according to the National Taxpayers Union. Congressional pensions are so generous that they can collect $5 million or more in benefits. These same Congress Critters who generally average millions in public pension benefits and who are already rich or exceedingly financially comfortable to begin with have no moral qualms whatsoever when it comes to robbing ordinary working stiffs of their Social Security checks.

There are other problems that differentiate the SS nightmare of today from the days when real surpluses accrued in the system. In 1950 there were 16 workers supporting every retiree on SS. These days there are under 3 workers to support every SS collecting retiree.

Social Security is destined to implode into full fledged generational warfare as the poor and middle class who are barely making it anyway are required to cough up even more money that they don't have to fund the Social Security shortfalls that were created by thieving Congress Critters.

Is Fedzilla About to Pull Off a $3.5 Trillion Private Pension Heist?

The alternate media and blogosphere are buzzing with very disturbing stories about how the government intends to steal/seize  private retirement accounts.

Government Sets Its Sights on Private Retirement Accounts: “Giant Effort to Redistribute the Wealth of America’s Older Citizens”

A new effort by the Obama administration, Congress, the Treasury Department and labor unions aims to fundamentally alter how Americans plan and save for retirement.

Warnings have been popping up over the last several years about the possibility of re-appropriating the $3.5 Trillion sitting in private retirement and spreading those funds around to Americans who are deemed less fortunate.

This couldn’t possibly happen in America, right? At one time, most Americans also believed heath care mandates that force Americans at the barrel of a gun to surrender portions of their earnings into a universal system for all would never happen. Well, it did.

And now, those who would control and regulate every aspect of our lives are making a new push; one whose efforts will ultimately end in the seizure and redistribution the personal retirement savings of every American who has ever put money into a 401(k) or IRA.

This is no longer in the realm of conspiracy, but rather, public record.

The articles goes on to document what is currently happening, including "A recent hearing sponsored by the Treasury and Labor Departments marked the beginning of the Obama Administration’s effort to nationalize the nation’s pension system and to eliminate private retirement accounts including IRA’s and 401k plans, NSC is warning.".  If this is true, it's an outright expropriation and theft of all private pensions.

Another view of the situation involves the government erasing the tax deductability of private retirement savings.

Keep Retirement Savings Accounts off the fiscal cliff discussions 

Currently, taxpayers can set aside up to $17,000 in a retirement account without paying taxes on it until it is withdrawn during retirement.

This provision allows workers and small business owners to defer taxes on money they save for retirement until they are older, and more likely to be in a lower tax bracket. It also is becoming an important leg of future generation’s retirement planning as defined benefit pensions become more and more rare.

However, with more than nine trillion dollars invested in tax deferred retirement accounts, these retirement savings have become to some in Congress an almost irresistible pot of money with proposals floated in the past couple of years to replace the savings with government annuities among other things.

Alarming and disturbing as these facts are, there is a whole lot more to the story. Public pensions are massively underfunded and private pensions are also underfunded and becoming the liabilities of the federal government.

State Pensions Underfunded by $4 Trillion

Public pension funds across the country are severely underfunded, threatening the retirement security of government workers and the wallets of taxpayers.

State Budget Solutions, a non-partisan fiscal watchdog, says the underfunding is more than $4 trillion.

Don’t Stick Taxpayers With Underfunded Corporate Pensions

Pension Benefit Guaranty Corp. running $34 billion deficit

The federal agency that insures pensions for 43 million Americans saw its deficit swell to $34 billion in the past year, the largest in its 38-year history.

In its annual report released Friday, the Pension Benefit Guaranty Corp. blamed the growing shortfall on its inability to charge private employers adequate premiums for insuring pensions.

Companies are notorious for shortchanging pension contributions and even dumping pension liabilities on the taxpayers. This is a very problematic trend that will vastly accelerate.

Record $355B Pension Underfunding for S&P 500 Companies

Defined-benefit pensions at S&P 500 companies reached a record underfunding level of $354.7 billion at the end of 2011, an increase of more than $100 billion from 2010 and surpassing the $308.4 billion prior record underfunding level set in 2008, according to a new study by S&P Dow Jones Indices. Underfunding for other post-employment benefits, or OPEBs, increased to $223.4 billion in 2011 from $210.1 billion in 2010.

“Companies are continuing the trend of moving away from pension obligations and into 401 types of investments as they shift the responsibility of retirement away from the corporation and over to the individual,” says Howard Silverblatt, senior index analyst at S&P Dow Jones Indices.

Combined, the amount of assets that S&P 500 companies set aside to fund pensions and OPEB amounted to $1.38 trillion, covering $1.96 trillion in obligations with the resulting underfunding equating to $578 billion, or a 70.5% overall funding rate.

The rush to seize private pensions is also driven by the fact that Social Security is no longer the cash cow for the government that it once was and its ability to continue to pay benefits now require dipping into general revenues.  In other words, the Social Security taxes collected no longer cover the benefits paid.

THE END OF SOCIAL SECURITY SELF-FINANCING: WHAT NEXT?

The Social Security nightmare is substantially the result of the government plundering the Social Security Trust Fund and leaving a worthless pile of IOU's that total at least $2.5 trillion.

Yes My Fellow Americans, Congress Really Did Steal Your Social Security

Fast forward to 2012 and the outright theft of the Social Security Trust Fund is now estimated at $2.5 trillion.

And that's the bitter truth folks. The Social Security Trust Fund has been nothing but a slush fund for Congress Critters since its inception. Congress stole the money, left a big pile of worthless IOU's and spent the money on wars, pork, corporate welfare and other slop. It was a relatively easy heist to accomplish because for decades the SS tax far exceeded the cash outlays to SS recipients. Now, Congress is in an absolute panic because the SS Trust Fund is fully plundered and the SS taxes collected are not sufficient to pay the benefits. In recent years the government has been using general revenues to cover annual shortfalls in the $30-70 billion range and that number will only explode as the Baby Boomers retire.

The idea of the government seizing private retirement accounts is nothing new and Congress held formal meetings on the issue back in 2010.

NEW LAME DUCK THREAT TO BAILOUT UNION PENSIONS

10/8/2010
Democrats in the Senate on Thursday held a recess hearing covering a taxpayer bailout of union pensions and a plan to seize private 401(k) plans to more “fairly” distribute taxpayer-funded pensions to everyone.

Initially, the scheme to seize private pensions was based on a wealth transfer to bailout public sector pensions.  But now that the public sector pension mess ($4 trillion shortfall in funding) has mushroomed into an even bigger financial catastrophe and a plundered SS Trust Fund combined with a bankrupt federal Pension Benefit Guaranty Corp that insures private pensions have entered the picture, I predict that the government will accelerate its scheme to plunder private sector pensions.

America Really is DEBT MAN WALKING, Fedzilla Spends $114,253 Per Second on Revenues of $73,043 Per Second

Drudge had a big ominous headline today.

Federal Deficit Highest Since 1940s

The federal deficit is higher than it has been since the 1940s, in the years immediately after World War II.

A new visual from the "Face the Facts USA," a non-partisan election project from George Washington University, shows the federal deficit has risen significantly under President Barack Obama, and that the government is increasingly spending money it doesn't have.

In every second of 2011, for example, the government spent $114,253—even though it was only taking in $73,043 in revenue. According to Face the Facts, that means the federal government spent $41,210 every second that it didn't actually have.

For the most part, Americans remain clueless relative to the significance of this incredible fact (America being broke and bankrupt) and that's largely because Americans perceive the government as the perpetual cornucopia of plenty that has an infinite capacity to keep them in a style to which they have become accustomed. The massively unsustainable entitlement state absolutely will burst at the seams and fail, just as it has in Greece, Spain and other European nations.

Just how broke is America? We are currently spending about $3.8 trillion on tax revenues of about 2.3 trillion. The debt is over $15 trillion and climbing. Bush and the Republicans exploded the national debt in 8 years by $5 trillion. Obama has already increased the debt by another $5 trillion and counting in about 3 years. No effort is being made to rein in the spending. The government believes that it can literally spend its way out of national bankruptcy and economic ruin.

Think about the cuts that would be required to live within our means ($2.3 trillion in tax receipts). Well, the federal government doesn’t actually have $2.3 million to spend because Social Security receipts fly right out the window in benefits.

The interest on the national debt in 2011 was a staggering $454 billion, according to the Treasury's own website, here.  Of the $2.3 billion in 2011 federal revenues, $1.3 billion came from income taxes and $800 billion came from Social Security taxes, money that is supposed to be untouchable and not spent by Congress but the Social Security Trust Fund is routinely plundered.

Yes My Fellow Americans, Congress Really Did Steal Your Social Security

The White House budget reported that $780 billion was disbursed to SS recipients in 2011. USA Today reported that Medicare and Medicaid totaled a staggering $992 billion in 2011 ($554 billion for Medicare and $438 billion for Medicaid), here. At least 58% of the American people are dependent on government funded healthcare. There are other big entitlement programs like housing, food stamps and unemployment compensation, to name a few.

With Medicare and Medicaid eating up nearly $1 trillion of the $2.3 trillion in federal tax receipts, it's been reported that all federal entitlements now exceed total federal revenue.

Government Cash Handouts Now Top Tax Revenues

U.S. households are now getting more in cash handouts from the government than they are paying in taxes for the first time since the Great Depression.

Households received $2.3 trillion in some kind of government support in 2010. That includes expanded unemployment benefits, as well as payments for Social Security, Medicare, Medicaid, and stimulus spending, among other things.


But that’s more than the $2.2 trillion households paid in taxes, an amount that has slumped largely due to the recession, according to an analysis by the Fiscal Times.

This cannot end well.  In fact, it will end very, very badly for the American people.  The day will dawn when they wake-up and discover that the government really wasn't the cornucopia of plenty as their fictitious standard of living gets nuked by their own delusions and they are blasted back to an era that few Americans are prepared for, namely, living on what they produce and without mountains of fiat debt and government entitlements.