The Social Security System is Fully Funded Through 2033
The Social Security Trust Fund is the only funding that exists to support Social Security. Social Security gets the bulk of its cash from annual payroll taxes. Without payroll taxes, the Trust Fund would be exhausted in about 3 years.
It is possible to say that Social Security is projected to be solvent until 2033. Even that statement stretches the truth a bit, because it assumes that the working generation will continue to support payroll tax in the face of a 25% cut in benefits. To believe this statement you have to believe that people pay into Social Security without regard to what they are going to receive.
Social Security Has Not Added One Penny to the Federal Budget Deficit
This myth is claimed by both Republicans and Democrats. It is completely untrue. In fact, both parties have contradicted their own statements in the debate about the ‘tax-holiday’ from payroll taxes. Both parties justify lower FICA to create jobs. The Domenici-Rivlin plan quotes the Congressional Budget Office projections that lower FICA taxes will lead to 2.5 and 7 million jobs. In other words, reducing FICA from 12.4% to 10.4% could generate more than 250 billion dollars of taxable wage income for the general fund. One has to wonder how many jobs the 10.4% has killed.
The laws of economics are not exact. One law, Hauser’s Law, suggests that there is a limit to the amount of taxes that the government can collect. This concept is backed by common sense, and considerable academic research. If it is true, payroll taxes will compete against income taxes for the tax base – they are like two straws drinking from the same soda. What one takes the other cannot.
Social Security Is A Regressive Tax, Unfairly Burdening Low-Income Workers
Social Security is highly progressive.
First, the statement is completely false. The Earned Income Tax Credit was originally introduced in 1975 to "to offset the burden of the Social Security payroll tax for low-wage workers". (source "Message Of The President, 1996 Budget", page 14). That credit has been expand since that time.
Second, people who say that Social Security is regressive are telling less than half of the story. The statement ignore the impact of benefits. In the latest reports from the Social Security Administration, there are high wage workers who collect $0.40 on the dollar paid where as some low-income workers collect more than $2 for every dollar contributed. For anyone who expects to collect more than a dollar of benefits for a dollar of contribution Social Security isn't a tax. It may be a bad investment which does not pay in full, but it cannot be a tax.
Here is what the Social Security Administration says: Social Security taxes "can be described as contributions to the social insurance system that is Social Security."
Social Security Benefits are Earned; I Want What I Paid For
Benefits are not earned. Benefit levels are defined by act of Congress. Benefit formulas have been changed in the past, and there are more changes under consideration at this moment. If Congress says that you are entitled to nothing, then you have received all of the benefit to which you are entitled.
That isn’t our opinion. It is the opinion of the Supreme Court. According to the Supreme Court, your benefits are legislated not earned over a lifetime of work. You cannot vest your benefits in Social Security. The terms of Social Security are very clear. You contribute on the belief that future generations will participate, but there is no guarantee of future benefits.