certainty about the future has resulted in suggestions for change that range from minor adjustments to complete privatization of the system. What is Social Security?Social Security is a contributory social insurance program providing benefits to millions of Americans. Workers contribute financially to the system during their careers and earn entitlement to family benefits upon retirement, disability, or death. Currently, nearly 44 million Americans receive benefits under the Old Age and Survivors Insurance and Disability Insurance (OASDI) programs that make up Social Security. This group includes some 30 million elderly retirees and their dependents, 6 million disabled workers and their dependents, and more than 7 million survivors of deceased workers. The Way Social Security is FinancedAbout 96 percent of workers in the United States contribute to Social Security, paying a flat tax of 6.2 percent of their wage income up to $68,400; their employers contribute an equal amount. If, however, as many economists believe, employers shift the cost of Social Security taxes onto workers in the form of lower wages, workers in effect may actually bear a substantially larger share of the tax burden than employers. Self-employed people pay both their own and their "employer’s" share; their tax rate is 12.4 percent, half of which is tax deductible for income tax purposes.8While the payroll tax is by far the largest source of funding for Social Security, a small amount of additional revenue is raised through the taxation of the Social Security benefits of high-income beneficiaries. Social Security is largely funded on a pay-as-you-go basis. Social Security is not a "piggy bank" that employees put money into and then take out of when they retire. The benefits that today’s Social Security retirees receive are paid out of taxes collected from today’s workers that are earmarked for the payment of these benefits. Out of this tax money, th...
