Monday, June 7, 2010

Is Social Security 'insurance'?

Chicago PM 7 June 2010

Editors, The Wall Street Journal


The Wall Street Journal letters headline of Monday, June 7 “Can Social Security still be thot of as Insurance?” has a definitive answer in the 1961 Supreme Court Fleming vs Nestor Decision, which says:
“The noncontractual interest of an employee covered by the [Social Security] Act cannot be soundly analogized to that of the holder of an annuity, whose right to benefits are based on his contractual premium payments.
“To engraft upon the Social Security System a concept of "accrued property rights" would deprive it of the flexibility and boldness in adjustment to ever-changing conditions which it demands and which Congress probably had in mind when it expressly reserved the right to alter, amend or repeal any provision of the Act.”

The word 'insurance' more commonly describes private health insutance, fire insurance, or life insurance, each of which is based on the fact of bad things happening to some people, but not everyone. So if you get enough people to contribute to a pool, you will be able to cover the relatively few who suffer the losses, and everyone is happy.

Social Security has no such pool. Its funding is solely a tax on employers (no wage earner has ever sent in a personal check to cover his 'contribution.') The only pool this money has ever gone into is the US general fund.

This same scam was also applied to income taxes with the Current Tax Payment Act of 1943, resulting in the 2010 Statistical Abstract of US, table #468, page 311 showing in 2008, 62% of the total federal government receipts of $2.745 trillion was withheld from wages. So nearly 2/3 of all the actual dollars that came into the US general fund were from employer bank accounts, not employee's . Employers can pass all of this on in price increases, so the federal government is 2/3 funded by a silent national sales tax. Because of a regularly expanding national economy, it's all but painless to voters.

This could be solved by changing paragraph 3402 of USC Title 26 — 'Internal Revenue Code' Subtitle C 'Employment taxes' Chapter 24 'Collection Of Income Tax At Source On Wages'... from "every employer making payment of wages shall deduct and withhold upon such wages a tax..." to "every employer making payment of wages shall pay all of those wages to the employee...." The employer would still calculate the tax, replacing the reassuring (but thoroly misleading) note "you earned and your employer paid" with "here is how much the feds are expecting you personally to send in within 30 days"

Would this be inefficient? Certainly for an insatiable federal bureaucracy. But after a few months writing checks to the Federal Government for 20% of their take-home pay, Americans will start voting tomake an honest country out of us.

Arnold H Nelson

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