Friday, February 04, 2005

Social Security Snapshot

Those who support "saving" Social Security without creating personal accounts, what are perhaps the two most common proposals? Raising the tax rate, or raising the taxable income level.

In response to that, here's the short version of my numbers from yesterday. Listed are the OASI tax rate and the maximum income (in 2000 dollars) subject to that tax.

1940 2% $36,900
1960 5.5% $27,924
1980 9.04% $54,126
2000 10.6% $76,200

The tax rate is 5.3 times what it was when Social Security began, and more than twice as much income is subject to taxation. In 1940, the maximum tax paid by any person was $60 ($657 in 2000). In 2000, it was $8077, over twelve times the 1940 maximum.

(To preempt the obvious response, benefits have also risen over this time. But they haven't risen as much. Unfortunately, that math can't be laid out as cleanly as the above numbers.)

Raising the tax rate has been done, and done a lot. Raising the income level has been done too. And yet, the system is still scheduled to run out of money. If those remedies didn't work the first dozen times they were attempted, why should we go for the baker's dozen?

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