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The Social Security system has been a contentious political issue ever since it was proposed by President Franklin D. Roosevelt and implemented in 1935. Arguments regarding how the system should be used, administered, and funded — and even whether it should exist at all — have been the subject of debate for many decades now: Examples: [Collected via e-mail, October 2005] Variations: A version of this piece circulated via e-mail in 2005 opened with the following introduction: In this vein, the above-quoted item seeks to enumerate (and assign blame for) alterations to Social Security that have supposedly betrayed the intent of the system as originally conceived back in the 1930s. Most of the entries contained therein, however, are inaccurate regarding what changes were made and/or who was responsible for making them: There was no provision in the Social Security Act of 1935 (nor has there ever been any provision) for the payment of Social Security payroll taxes (now commonly known as FICA, from an acronym for the Federal Insurance Contributions Act) to be voluntary. Since the inception of the Social Security program, the law has required that payroll taxes for persons working at jobs covered by Social Security shall be collected by the employer of the taxpayer by deducting the amount of the tax from the wages as and when paid. It is true that Social Security provisions originally applied only to workers in commerce and industry (except railroads) under age 65 in the continental United States, Alaska and Hawaii, and on American vessels, and thus those who worked in fields not designated as commerce and industry (e.g., government workers, farm workers, doctors, lawyers) neither paid into the Social Security fund nor received benefits from it. Nearly all of those exemptions have been since phased out: Social Security taxes were never limited to the first $1,400 of annual income, nor was there any provision in the Social Security Act of 1935 to permanently fix the tax rate at 1%. The Social Security Act of 1935 set the original rate at 1% of the first $3,000 of annual income, with provisions to gradually increase that rate to 3% over the next twelve years: These figures have been adjusted many times over the years. Under the Federal Insurance Contributions Act, as of 2005 participants pay 6.2% of the first $90,000 of their income (with their employers contributing a like sum) into what is commonly known as OASDI (from an acronym for Old Age Survivors and Disability Insurance, the official name of the basic retirement benefits portion of the Social Security program). The original Social Security Act of 1935 specifically stated that Social Security payroll taxes were not to be allowed as income tax deductions: Social Security payroll taxes have never been deductible from income for tax purposes, either when the program was originally instituted or at any time since. The Social Security Trust Fund was established in 1939 to receive monies collected for Social Security through payroll taxes. The monies in this fund are managed by the Department of the Treasury; they are not, nor have they ever been, put into the general operating fund. However, whether the Social Security Trust Fund can truly be said to be independent is problematic. The Social Security Act specifies that the monies in the fund may only be invested in securities backed by the full faith and credit of the Federal government, such as treasury bills, treasury notes, and treasury bonds, as well as special issue bonds. So, essentially, the government can invest Social Security funds by lending them to itself, then spending that money on programs not related to Social Security (e.g., defense, foreign aid, education). The government pays back this money when the Social Security program redeems the bonds, but critics of the program contend Social Security will eventually fall into deficit by 2018, and the Treasury won't have the necessary cash on hand to redeem the bonds and pay back the fund. As the Social Security and Medicare Trustees themselves noted in their 2005 Annual Report: A somewhat dated but detailed article about how the Social Security trust funds are invested can be found here. It is true that Social Security benefits were not originally considered taxable income. However, that status was not due to any promise or act on the part of President Roosevelt, nor was it specified in the Social Security Act (or any other law); it was the result of a series of rulings by the Treasury Department in 1938 and 1941 that excluded Social Security benefits from federal income taxation. Those rulings were overriden by amendments to the Social Security act enacted in 1983. As noted above, the monies paid into the Social Security trust have never been put into the general fund. The requirements for how the Social Security Trust Fund is to be financed and invested have not changed since the fund's inception in 1939. The reference to Lyndon Johnson indicates that someone was probably confused by a change implemented at the end of the Johnson administration (1969) that altered how the fund was accounted for in the federal budget but did not change the actual operations of the fund itself: This method of accounting for the Social Security Trust Fund in the federal budget was reversed in 1990. As noted above, Social Security withholding has never been deductible from income for tax purposes. The original Social Security Act of 1935 specifically stated that monies paid into Social Security via payroll taxes were not to be allowed as income tax deductions. Prior to 1984, income derived from Social Security benefits was exempt from taxation. Amendments to the Social Security Act passed by Congress in 1983 allowed for 50% of Social Security benefits to be considered taxable income for taxpayers whose total income exceeded specified thresholds. Responsibility for this change cannot fairly be assigned to either political party. The idea originated with a proposal issued by the bipartisan Greenspan Commission, which had been created by President Ronald Reagan, a Republican. The amendments were passed by a House of Representatives in which the Democrats held a clear majority of the seats (296-166), but the proposed amendments received Yea votes from members of both parties, and they were signed into law by President Reagan. In 1993, Congress passed legislation that increased the percentage of Social Security benefits subject to taxation from 50% to 85%. As with the 1983 amendments to the Social Security Act, this increase applied only to taxpayers whose total income exceeded specified thresholds. This change to Social Security was but one element of the massive Omnibus Budget Reconciliation Act (OBRA) introduced in Congress in 1993. OBRA was barely passed by a 218-216 vote in the House of Representatives, with not a single Republican voting in favor of it (although 41 Democrats voted against it). Likewise, the Senate vote on OBRA was deadlocked at 50-50 (again, with not a single Republican voting in favor of it, although 6 Democrats voted against it) until Vice-President Al Gore (a Democrat) cast the deciding Yea vote. The bill was signed into law by President Bill Clinton (also a Democrat). No one — whether he be a citizen, immigrant, or illegal alien — is eligible to collect Social Security benefits unless he (or someone else, such as a parent or spouse) has paid into the system. Someone has confused Social Security itself with Supplemental Security Income (SSI) — the latter is a federal welfare program designed to help aged, blind, and disabled people, who have little or no income by providing cash to meet basic needs for food, clothing, and shelter. Immigrants can qualify for SSI benefits under certain conditions, but SSI is financed by general revenues and not Social Security taxes. SSI was not enacted by the administration of President Jimmy Carter (a Democrat); it was created and signed into law in 1972, during the administration of President Richard Nixon (a Republican). Additional information:
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