Tuesday, July 22, 2008

1937 and 2008

In 1937, the maximum base social security was applied to was the first $3,000 of wages. No worker or employer paid social security taxes on any wages greater than $3,000. The wage base or cap as some refer to it was set at about 110% of the average wage. It was done so that social security would not appear to be supported by the wealthy for the benefit of lower wage workers.

The social security benefit was not and never was based on the dollars paid into social security, but was/is based on the wages subjected to the social security tax. Based on benefit formula, even if the tax rate was zero, the social security benefit would be unchanged.

The tax rate in 1937 was 1% each for employer and employee.

This means a worker would pay a maximum of $30 into social security for the year.

Let us fast forward to 2008. The social security OASI tax is not 1% anymore, but 5.6%. The base is no longer 110% of the average wage, but is over 270% of the average wage and is now $102,000. The maximum tax paid by a worker per year is no longer $30, but $5,712. But since 1937 programs have expanded. The Social Security Disability program took zero dollars, but now takes $918. Medicare did not exist and now takes $1,479.

In summary, our elected representatives took $30 in 1937 and now extract as tribute $8,109! It may be that Souder has had little to do with the price of gasoline rising from $1.13 in 1995 to over $4.00 in 2008, but there is no doubt that all elected representatives are to blame for the our decreased take home pay.

My plan for social security would allow all workers to retain not only the employee's share of the OASI Tax, but the employer's paid portion as well. Instead of handing out a one time rebate of $600 or suspension of the gasoline tax that might save you $30, I want you to keep from this point forward your Social Security OASI tax. You can find my plan at www.justsayno.50megs.com


1937 2008
OASI 1.00% 5.60%
DI 0.00% 0.90%
MI 0.00% 1.45%
Base $ 3,000 $ 102,000
OASI $ 30 $ 5,712
DI $ - $ 918
MI $ - $ 1,479
Total $ 30 $ 8,109

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