Tuesday, November 20, 2012

The Painful Truth About Social Security

The Painful Truth About Social Security Most working Americans believe the monthly deductions from their paychecks legally entitle them to future Social Security Benefits. Sadly, nothing could be further from the truth. Do you think Social Security is an “earned right?” Most people do. Social Security checks say “Federal Benefit Payment” on it. This isn’t a benefit- its earned income! I’ve worked hard my whole life. I’ve paid in thousands of dollars in Social Security Taxes. Now I’m just collecting what I put in.” Sounds logical. Seems fair. Legally, however, the argument falls apart. Here’s the fact: You have no legal “right” to collect back what you’ve paid into Social Security. In fact, the Supreme Court has already ruled that…. Anyone Collecting Social Security is Actually on Welfare Facts are the facts. And the issue was settled in court a long time ago. The first time the court spoke about it was shortly after President Franklin D. Roosevelt pushed the Social Security Act upon the American People. In a case named Helvering v. Davis (1937), the Supreme Court ruled that Social Security was not a contributory insurance program. Here’s how they put it (in true legalese): “The proceeds of both the employee and employer taxes are to be paid into the Treasury like any other internal revenue generally, and are not earmarked in any way.” In simple words: Social Security is Not an Insurance Program You do not “accrue” any benefits. You are technically “owed” nothing. It doesn’t matter how long you’ve paid in or how much you’ve paid. Social Security is simply a payroll tax on one side and a welfare program on the other side. Now understandably, some in Congress didn’t like the sound of that. Adding a new “tax” in the middle of the Great Depression wasn’t the best way to get votes. So in 1939 they amended the Social Security Act to create a formal trust fund. The amendment also ordered the Treasury department to submit and annual report on the statues of the fund. Because there is now a fund set up to formally “earmark” the social security tax receipts, most people think Social Security is like a bit government pension or insurance program. Wrong Again. Just because Congress created a “fund” to segregate Social Security from other collected taxes, the essence of the law never changed. What held true in the Supreme Court ruling of 1937 is still true today. Social Security is just another payroll tax. You don’t actually build up any “equity” through your so-called “contributions.” Not convinced? Still think you’re “owed” Social Security? … or that you’ve “earned” the right to your benefits” If so, you’re not alone. The Commie Who Sued the Government… and Lost Ephram Nestor came to the United States in 1918 from Bulgaria. He paid Social Security taxes from 1936 (the year the system began operating) until he retired in 1955. For his 19 years of payments into the “system,” the U.S government rewarded Ephram with a $55.60 monthly Social Security check. But a year later, the US Immigration Service deported Nestor for having been a member of the Communist Party in the 1930’s. In 1954 Congress had passed a law saying that any person deported from the United States would lose his Social Security benefits. Based on that law, the US Treasury stopped sending Ephram Nestor his monthly Social Security check. Nestor sued, claiming that because he had paid Social Security taxes, he had a right to Social Security benefits. The Supreme Court disagreed. Specifically, the Court ruled (in the case of Fleming v. Nestor) that workers have no legally binding contractual rights to their Social Security benefits. The court went on to say that Social Security benefits are essentially a government welfare program that can be cut or even eliminated at any time. The bottom line is this: your Social Security benefits are always subject to the whim of 535 politicians in Washington. Doesn’t that make you feel “secure?” Congress Has Created the Confusion One of the main reasons people don’t understand this basic fact (that Social Security is a tax on one side and a welfare program on the other) is the way Congress talks about it. Congress encourages people to think they are “investing” in an annuity-like insurance policy by calling Social Security taxes “contributions.” When you pay Social Security tax, your pay stub says it is a FICA deduction. FICA stands for Federal Insurance Contribution Act. There are actually two misconceptions in that phrase. First, the Supreme Court has ruled it’s NOT insurance. It’s and old-age welfare program. Secondly, the Court has also ruled it’s NOT a contribution. It’s a tax. So why do they continue to dodge the issue and use these terms? That’s easy. Social Security carries huge political leverage. Think about it. How politically appealing would it be to call it the Federal Old-Age Welfare Tax Act? That’s what it is, but politicians are very happy to let their constituents believe Social Security is an Insurance Program. The Social Security Administration Perpetuates the Misconception In addition, the Social Security Administration (SSA) perpetuates the mistaken belief by mailing out annual Social Security statements to individual taxpayers. These reports show the mount you’ve “contributed” over your life… and how much you can expect to receive when you retire at certain ages. While this can be helpful to people who are planning to have the government pay their retirement (partially or in full), it only adds to the confusion. These annual statements mislead people into thinking they personally have a “share” of the Social Security trust fund earmarked for them. They don’t. These annual statements also convince people they are “owed” the described benefits. They aren’t.