Thursday, December 29, 2011

Funding Social Security

While I am on the subject of economies struggling to meet welfare needs yesterday I received this release from the US Social Security administration:

Tax Rates (percent)
Social Security (Old-Age, Survivors, and Disability Insurance)
Employers 6.20
Employees a,b (through February 29, 2012) 4.20
(beginning March 1, 2012) 6.20

The employee share of payroll taxes to fund social security is to rise from 4.2 (cents in the dollar) to 6.2 in March next year. Apparently the lower employee rate was a temporary measure which cannot be sustained. From Forbes earlier this year:

 Meanwhile, if you’re a worker, start tightening your belt: The Social Security taxes taken out of your paycheck could rise to $6,826.82 next year, from $4485.60 this year—a significant $2341.22 hike. The increase is due to two factors. First, as the SSA announced today, the maximum salary subject to Social Security tax is rising from $106,800 in 2011 to $110,100 in 2012 as part of the just announced inflation adjustments. That increase affects about 10 million wage earners. Second, a temporary 2011 rate cut in the employee’s part of the Social Security tax—from 6.2% to 4.2% of pay–is scheduled to expire.  As  part of his proposed jobs package, President Barack Obama wants to cut the employees’ Social Security tax to just 3.1% for 2012. But Republicans have so far shown no inclination to pass the provision, which would cost $175 billion and seem ready to let the 2011 rate cut lapse, leading to a tax hike on all workers.

(Unemployment insurance is additional to these rates.)


Anonymous said...
This site lets you work out how much of the tax you have paid is apportioned to each government department. I worked this out for us in 2010. The following figures are higher than on the site because I estimated the amount of GST we pay in addition to income tax. 17% of the tax we paid went to fund welfare. 38% of the tax we paid (19% of our total income) went to fund welfare, health, and education. We had life insurance, income protection insurance, medical insurance, and our children were home schooled, which means we are likely to be receiving very little government spending on welfare, health, or education.

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