Saturday, November 25, 2006

Vicious Rumors


There is an email circulating that seems to reflect badly on certain political partiies.
I'm not going to defend either party. I don't care.
But I will defend the truth.
Thanks to Corrine who brought this to my attention.
Here is that email in part.

"Franklin Roosevelt introduced the Social Security (FICA) program. He promised:
1) That participation in the program would be completely voluntary;

2) That the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program;
3) That the money the participants elected to put into the program would be deductible from their income for tax purposes each year;
4) That the money the participants paid in would be put into the independent "Trust Fund," rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement program, and no other Government program.;
5) That the annuity payments to the retirees would never be taxed as income."

And here is the truth.
Source: Social Security Website

Myth 1: President Roosevelt promised that participation in the program would be completely voluntary
Persons working in employment covered by Social Security are subject to the FICA payroll tax. Like all taxes, this has never been voluntary.
Myth 2: President Roosevelt promised that the participants would only have to pay 1% of the first $1,400 of their annual incomes into the program

The tax rate in the original 1935 law was 1% each on the employer and the employee, on the first $3,000 of earnings. This rate was increased on a regular schedule in four steps so that by 1949 the rate would be 3% each on the first $3,000. The figure was never $,1400, and the rate was never fixed for all time at 1%
Myth 3: President Roosevelt promised that the money the participants elected to put into the program would be deductible from their income for tax purposes each year
There was never any provision of law making the Social Security taxes paid by employees deductible for income tax purposes. In fact, the 1935 law expressly forbid this idea, in Section 803 of Title VIII.
Myth 4: President Roosevelt promised that the money the participants paid would be put into the independent "Trust Fund," rather than into the General operating fund, and therefore, would only be used to fund the Social Security Retirement program, and no other Government program
The idea here is basically correct. However, this statement is usually joined to a second statement to the effect that this principle was violated by subsequent Administrations. However, there has never been any change in the way the Social Security program is financed or the way that Social Security payroll taxes are used by the federal government.
The Social Security Trust Fund was created in 1939 as part of the Amendments enacted in that year. From its inception, the Trust Fund has always worked the same way. The Social Security Trust Fund has never been "put into the general fund of the government."

Myth 5: President Roosevelt promised that the annuity payments to the retirees would never be taxed as income
Originally, Social Security benefits were not taxable income. This was not, however, a provision of the law, nor anything that President Roosevelt did or could have "promised." It was the result of a series of administrative rulings issued by the Treasury Department in the early years of the program. In 1983 Congress changed the law by specifically authorizing the taxation of Social Security benefits. This was part of the 1983 Amendments, and this law overrode the earlier administrative rulings from the Treasury Department

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