The number of workers per beneficiary has been declining and will continue to do so-from 3.3 workers for every beneficiaries in 1996, to 2.0 workers per beneficiaries in 2030.

22.2 Employers can deduct FICA payments from their income taxes. Why can't the individual do the same?

Employers treat them as business expenses and deduct them from their income to determine taxable income. The same could be done for employees (but then benefits might be fully taxable), but present law does not so provide.

22.3 How have the payroll tax rates changed over the years?

The following chart shows the tax rate for the combined Old Age and Survivors Insurance and Disability Insurance programs (and not the Health Insurance program) since the beginning of the program. The rates shown are for employees. Employers match that rate. The rate for the self-employed was generally 1.5 times the rate for an employee from 1937 through 1983, and 2 times the employee rate starting in 1984. The disability program was added to the system in a series of amendments that affected the total tax rate starting in 1957. In 1998, 6.2 percent tax on employees is allocated as 0.85 percent for Disability Insurance and 5.35 percent for retirement and survivors benefits.

OASDI Tax Rates, 1937-1998

OASDI Tax Rates, 1937-1998
Year	OASDI Tax Rate(employer and employee,each)
1937-1949	1.0%
1950-1953	1.5%
1954-1956	2.0%
1957-1958	2.25%
1959	2.5%
1960-1961	3.0%
1962	3.125%
1963-1965	3.625%
1966	3.85%
1967	3.9%
1968	3.8%
1969-1970	4.2%
1971-1972	4.6%
1973	4.85%
1974-77	4.95%
1978	5.0%
1979-1980	5.08%
1981	5.35%
1982-1983	5.4%
1984-1987	5.7%
1988-1989	6.06%
1990 and thereafter	6.2%

22.4 What was the philosophical thinking behind excluding certain definitions of income (consultation fees, Michael Jordan's signing bonus, brokerage commissions, etc.)from the Social Security taxes?

Social Security contributions are required under current law on all earnings up to $68,400 in 1998. This income cap is adjusted annually. The above stated sources of income are subject to contributions if below the income cap. Taxing all earnings might have effect of reducing the broad based support for Social Security that exists now, because higher income earners would receive such small benefits in relationship to their contributions. Without broad support, Social Security over time could turn into a welfare- like program.

22.5 If we change the financing of the Social Security program so as to have an increase of 1% and eliminate the wage cap, will this really make the system stable?

These two changes would provide the additional revenues that would eliminate the long range financing deficit under current law.

22.6 Why is a flat tax regressive?

A so-called "flat regressive tax" is a tax set at a certain rate that applies to all income levels and does not increase at higher income levels.

22.7 Why can't the government reduce our taxes to offset the proposed 2% increase in Social Security deduction?

The proposed 2 percentage point increase in the Social Security contribution rate is part of a privatization proposal that would use the increase to finance private investment accounts. It would be possible to provide an off-setting income tax reduction but this would reduce revenue which is used to pay for other government spending. This recommendation could be made to your Congressional Representative and Senators for their consideration during the Social Security reform debate.

22.8 What will the impact be on income taxes when the Social Security trust funds redeems their bonds?

The government can pay back the money it owes to the Social Security trust funds by reducing spending elsewhere in the federal budget, borrowing in the private market, or increasing taxes. These are the same options it has when paying off private investors.

22.9 Why hasn't the issue of the FICA tax, as opposed to other taxing schemes, been discussed more?

There has probably been too little discussion of this important issue, especially because any proposals made in this area have been only for small increases in the tax rates beginning many years from now.

22.10 Would it be possible for employed people in poverty by federal guidelines be given credit without paying the payroll taxes and be taxed gradually as they rise above said guidelines?

This could be done through refunds subsequently, as is now done for poor people with children under the Earned Income Credit.

22.11 Can tax rates be adjusted every 3 to 5 years to keep pace with various generations of retirees and beneficiaries?

Certainly, that could be done, but it would require a change in the law. Present law provides a constant tax rate for the indefinite future.

22.12 What payroll tax increase would be needed to cover 100 percent of the current projected shortfall?

If currently legislated Social Security benefits were to be financed solely by raising taxes, the 6.2 percent tax on wages that workers and employers each pay would need to rise to about 8.4 percent in 2030, about 8.6 percent in 2050 and 9.24 percent in 2075, according to official projections made in 1997.