Why Do We Pay a Social Security Tax?
You can trace the beginnings of Social Security back to the Great Depression of the 1930's. The financial collapse on Wall Street was bad, but the impact on the ordinary working person was far worse. Families struggled to afford a place to live and to put food on the table. In response to the dismal conditions, President Franklin Delano Roosevelt and Congress created a safety net called Social Security.
Fixed Percentage for All
When the Social Security Act of 1935 went into law and the first monthly checks began going out in 1940, the idea was to help provide for the welfare of those who were in need, and the program was set up to provide benefits for older Americans when they retired. In order to fund this retirement pension, a Social Security tax was imposed on all workers. Unlike Federal Income Tax, where some people pay a higher percentage of their income than others, everyone pays the same percentage for the Social Security tax. In 2014, your employer must pay 6.2% and you must pay 6.2% of your wages in Social Security taxes for a total of 12.4% of your earnings. If you are self-employed, you are responsible for paying the full 12.4% of Social Security taxes that are due. Any income over $117,000 is not subject to this tax.
Worker to Beneficiary Ratio
Shifting demographics have caused the certainty of Social Security's solvency to come into question in recent years. When the program was in its early stages, there were far more workers paying in to the system than receiving benefits from the system. Today, the large number of retirees and people on Social Security Disability are putting a real strain on the Federal budget. Every individual working today must continue to pay their share to support those who are receiving benefits.
As the ratio of workers paying Social Security taxes, versus the number of retirees and disabled individuals receiving benefits, continues to shrink, the administrators of the program, Congress, and the President, are all looking for ways to ensure the system does not run out of money. The age at which you can start taking your full benefit has been going up, along with the maximum amount of taxable earnings subject to the payroll deduction.
Valuable Service for Many
While critics will argue about welfare programs like food stamps, housing subsidies, and Medicaid, but no one wants the benefits of Social Security to be taken away from retirees who have contributed to the system and are rightly owed their benefits. While most people cannot live on Social Security alone, for many elderly folks, Social Security and Medicare are vital for their livelihood. Individuals who are legitimately disabled depend upon Social Security disability checks to provide income when they are not able to hold gainful employment due to their medical condition.
Americans want to have a social safety net in place when they become old or sick and are no longer able to work. Social Security provides a service to all US citizens that has proven invaluable to many beneficiaries. Since the program is available to all citizens, every working American must pay a Social Security tax.