Every week that you work, there are taxes deducted from your
gross payroll that are distributed to the Social Security
Administration, along with other programs administered by the
government. Of all the taxes we pay, social security is one of
the most beneficial, one of the most watched. Why do we pay
social security tax, and what does it potentially mean for all
Americans? The following article discusses the social security
tax regulations and what we benefit from the mandated deduction.
Social security tax is deducted from our payroll each week in
order to cover a portion of our retirement income when we reach
age 65, but also a survivor benefit, should we become disabled
during the course of our working life, or die as a result of
work-in which case the surviving spouse and children would
receive a monthly income supplement to help them with their
daily expenses.
Each and every day, we are bombarded with statements that want
to make us aware of the dire straits our social security system
and the gloom and doom picture we face in just a few years. This
article examines the information available about our social
security system, and asks the questions about its fate and ours.
The social security tax we know and pay today has become a
greater chunk of our income with the passing years. And, as if
this is not enough, it is the poorest of this nation that pay
the most, since there is a cap on the income levels that are
subject to the social security tax. Currently, any income above
$90,000 isn't subject to social security tax. This presents a
problem for the nations poor and the federal government's level
of social security tax received. As more and more of our
population begin to age, there are fewer and fewer based
employees to sustain the fueled growth and maintenance of the
social security system. Add to this the fact that individuals
with wage earnings beyond $90,000 are growing faster than the
wage base for employees who remain below the $90,000 level, and
you have the makings of a disaster. The latest predictions place
the collision date somewhere around 2017. That's not an
extremely distant future, and it certainly will be a problem for
the 45-50 year old wage earner.
So what has been proposed to deal with this growing problem?
There are currently several proposed solutions to the problem,
and all of them, with just a few exceptions point to higher
taxation of the wage earners income. It is interesting to note
here, that when income tax and social security, Medicare, and
the many other "beneficial" programs the government has
implemented to aid the general public, we have lost in the area
of disposable income. In 1913, when the income tax program was
begun, less than 1% of the average individual's income was
taxed. Today, we pay roughly 10% of our income in tax. That's a
staggering rate of growth, when you consider that our income
levels have also tremendously increased too. The following
paragraphs briefly outline some of the more popular proposals
for dealing with the projected shortfall, and the effect it
should have on "Joe Citizen".
Increases in FICA taxes; of course, this is a hard sell in the
current climate, but by the time we reach 2017, it might look
like a better solution than any of the others.
Increases in normal retirement age (NRA) have already begun, and
it looks like it is going to be an ongoing process. As our life
expectancy increases, the ability of social security to
accommodate greater payouts, and a reduction in the working
population continues, extending the NRA on past the age of 70 is
a real possibility.
Privatization of social security; although on the surface this
looks like a promising solution, it would take a special kind of
citizen to intelligently, objectively, and rationally invest
their 4% allocation wisely, and truly reap the benefit that
social security has previously provided.
Selling bonds or printing money. The US Treasury does have the
option to intervene and raise the money to accommodate the
excess demand, but you increase the probability of runaway
inflation when you begin to pump excess money into the economy.
What is the ultimate solution for this problem? No one really
knows, simply because no one can accurately predict long-range
models. 20, 30, of even 40 years into the future, accurate
predictions are extremely hard to come by.
About the author:
Tony Robinson is a Webmaster and International Author. Visit
http://www.tax-portal.com/ for his tax tips.
