Social Security More Than Pays For Itself

Once again the Republicans are talking about "reforming" Social Security, said to be an "Entitlement" that is "out of control."   Up until three years ago, payroll taxes more than offset Social Security payouts.   A surplus was built up over the years in the form of the Social Security Trust Fund that currently sits at 2.7 trillion dollars.    The Trust Fund holds government securities.    The "national debt" is partly represented by such intra-governmental debt as the Social Security Trust Fund.   So the only way that Republicans and the Tea Party can say that Social Security payouts are contributing to the debt at present is to ignore the 2.7 trillion dollar Social Security Trust Fund.   The interest on government bonds helps pay for benefits.   The Right constantly demeans the Social Security Trust Fund as "a bunch of IOUs."    Even ignoring the presence of a 2.7 trillion dollar surplus for Social Security, an additional factor needs to be taken into account regarding the deficit.   Since the Reagan Administration, Social Security retirement benefits have been subject to federal income taxes.    Up until that time, Social Security retirement benefit payments were not subject to federal income taxes.   During the Reagan Administration, Congress passed an income tax on Social Security retirement benefits at a very low rate.   Over the years, the tax has been raised until now essentially 80% of Social Security retirement benefits are subject to federal income taxes.    Although this tax was represented to be a "fix" for Social Security during the Reagan years, nobody ever seems to mention the amount of Social Security retirement benefits recovered by the national treasury in the form of income tax payments by Social Security beneficiaries.   I have tried to research this question but I have not been able to determine if the combination of payroll taxes and payouts recovered by the federal government in the form of income taxes on 80% of retirement benefits does not more than offset payouts from Social Security.   Even Democrat defenders of Social Security never seem to mention this factor.   My educated guess would be that if income tax payments are taken into account, Social Security does more than pay for itself, notwithstanding the existence of the Social Security Trust Fund.

Although I receive Social Security retirement benefit payments every month, since I am self-employed, I am still paying 12.4% of my gross earned income as payroll taxes.   Additionally, I have to pay federal income taxes on 80% of my retirement benefits.   So in my case, I am both paying in and taking out at the same time. The net amount I receive from Social Security is a lot less than the face amount of my benefit payment.   I am sure that my case is fairly typical.