How Are Social Security Benefits Funded?

Last week, Forbes had an interesting story about why the Social Security Administration (SSA) programs are funded differently than other government programs. In a column, Jeffrey Brown discusses how programs like Social Security Disability Insurance (SSDI) are funded using a payroll tax system.

The column says that this was done for economic and political reasons. For the economic reasons, Brown quotes President Franklin Roosevelt:

“We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.”

Brown said that Roosevelt designed the payroll tax system to ensure political sustainability, and that if SSA programs were viewed as other social welfare programs, they would have to compete for public resources. Instead, SSA programs are allowed to have the feel of insurance contracts, which Brown argues establishes them as a “legal, moral and political right.”

The column goes on to note the economic reasons SSA programs are funded differently. Through citing an academic paper by former U.S. Treasury Secretary Larry Summers, Brown argues that if you tax something, people usually ask for less of it. Brown uses the example of a direct tax on apple consumption, saying people would eat fewer apples.

As a separate payroll tax, Social Security taxes are not linked in peoples’ minds to the work they do, instead they are looked at as a contribution to a savings account.

How Do I Collect Social Security Disability?

It is good that people are pointing out how the SSA gets program funding.

Keep in mind, to qualify for SSDI you must have earned work credits, so they are not entitlement benefits. Most people receiving disability live very modestly. For further information on SSDI qualifications, we suggest you visit our FAQ page.

If you have questions about applying for benefits, contact a Tulsa Social Security disability attorney. We offer free consultations. Contact us today to learn more about your rights.

Troutman & Troutman, P.C. – Tulsa Social Security disability lawyers

Troutman Touts: Workers and employers pay a 12.4 percent tax yearly on the first $117,000 earned for Social Security benefits.

Source: http://www.forbes.com/sites/jeffreybrown/2014/06/25/why-do-we-fund-social-security-differently-from-other-government-programs/



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