Americans May Be Getting An Idea For What Social Security Really Costs Them


“For the first time in two decades, we raised taxes on the wealthiest 2% of Americans in a bipartisan way, while preventing a middle-class tax hike that could have thrown our economy back into recession,” President Obama said in his weekly address yesterday. “Under this law, more than 98% of Americans and 97% of small business will not see their income taxes go up one dime.”

That’s, well, a lie. As many as 77% of US households will see a tax increase thanks to the “fiscal cliff” deal, due mostly to the fact that reductions in payroll taxes were allowed to expire. Democrats argue that the expiration of temporary tax cuts shouldn’t count as a tax hike, but temporary or not, when Americans go from paying one level of taxes to a higher level of taxes that’s a tax hike regardless of whether or not the lower rates were temporary or not.

I believe that it was a good thing payroll taxes went back up. I opposed the payroll tax cuts as they cut revenues from the Social Security program. I have no love of that program, I think Americans ought to be allowed to opt out of it, but as it is currently structured the program is already in deficit. It is obligated to pay more in benefits than it receives in revenues, and thanks to a trust fund that was emptied long ago and replaced with US treasury bonds, Social Security’s deficit now adds to the national budget deficit.

The payroll tax cut only exacerbated that problem.

That being said, Americans are angry about their payroll taxes going up. And why wouldn’t they be? Their taxes are going up a lot:


Perhaps this sting will fade from the minds of Americans quickly. Or perhaps it will stick with them, and serve as a reminder of just how costly programs like Social Security are, and just how little most working-class Americans can hope to get back for them.

A lot of voters don’t really have any grasp on the cost to them directly of these programs like Social Security and Medicare. The taxes for them get removed automatically from their paychecks, and while the totals are right there on their pay stubs, because it’s all automated I don’t think many Americans even really think of that as their money.

But thanks to the payroll tax cut, they got used to keeping more of that money. Now that it’s going back to the government, they’re upset.

I’m not one to advocate higher rates of taxation, but there’s something to be said of appropriately pricing government and making that cost transparent to voters.