the funding for social security comes from payroll taxes.
the funding for social security comes from payroll taxes.
where does the funding for social security come from?
payroll taxes
bullet::::- social security is a social insurance program officially called "old-age, survivors, and disability insurance" (oasdi), in reference to its three components. it is primarily funded through a dedicated payroll tax of 12.4%. during 2016, total benefits of $910 billion were paid out, versus $882 billion in 2015, an increase of $28 billion or 3%. social security's total expenditures have exceeded its non-interest income since 2010. the deficit of non-interest income relative to cost was about $49 billion in 2010, $45 billion in 2011, and $55 billion in 2012. during 2010, an estimated 157 million people paid into the program and 54 million received benefits, roughly 2.91 workers per beneficiary. since the greenspan commission in the early 1980s, social security has cumulatively collected far more in payroll taxes dedicated to the program than it has paid out to recipients—nearly $2.6 trillion in 2010. this annual surplus is credited to social security trust funds that hold special non-marketable treasury securities. this surplus amount is commonly referred to as the "social security trust fund". the proceeds are paid into the u.s. treasury where they may be used for other government purposes. social security spending will increase sharply over the next decades, largely due to the retirement of the baby boom generation. the number of program recipients is expected to increase from 44 million in 2010 to 73 million in 2030. program spending is projected to rise from 4.8% of gdp in 2010 to 5.9% of gdp by 2030, where it will stabilize. the social security administration projects that an increase in payroll taxes equivalent to 1.8% of the payroll tax base or 0.6% of gdp would be necessary to put the social security program in fiscal balance for the next 75 years. over an infinite time horizon, these shortfalls average 3.3% of the payroll tax base and 1.2% of gdp. various reforms have been debated for social security. examples include reducing future annual cost of living adjustments (cola) provided to recipients, raising the retirement age, and raising the income limit subject to the payroll tax ($118,500 in 2014). because of the mandatory nature of the program and large accumulated surplus in the social security trust fund, the social security system has the legal authority to compel the government to borrow to pay all promised benefits through 2036, when the trust fund is expected to be exhausted. thereafter, the program under current law will pay approximately 75–78% of promised benefits for the remainder of the century.
united states federal budget
in january 1935, roosevelt proposed the social security act, which he presented as a more practical alternative to the townsend plan. after a series of congressional hearings, the social security act became law in august 1935. during the congressional debate over social security, the program was expanded to provide payments to widows and dependents of social security recipients. job categories that were not covered by the act included workers in agricultural labor, domestic service, government employees, and many teachers, nurses, hospital employees, librarians, and social workers. the program was funded through a newly established a payroll tax which later became known as the federal insurance contributions act tax. social security taxes would be collected from employers by the states, with employers and employees contributing equally to the tax. because the social security tax was regressive, and social security benefits were based on how much each individual had paid into the system, the program would not contribute to income redistribution in the way that some reformers, including perkins, had hoped. in addition to creating the social security program, the social security act also established a state-administered unemployment insurance system and the aid to dependent children program, which provided aid to families headed by single mothers. compared with the social security systems in western european countries, the social security act of 1935 was rather conservative. but for the first time the federal government took responsibility for the economic security of the aged, the temporarily unemployed, dependent children and the handicapped. reflecting the continuing importance of the social security act, biographer kenneth s. davis later called the social security act "the most important single piece of social legislation in all american history."
presidency of franklin d. roosevelt, first and second terms