While three top-level government executives who make up the board of trustees of the Social Security trust funds were preparing their 1970 report, a top-level official of the Social Security Administration was assuring us: “You have every right to expect that they’ll find Social Security as sound in 1970 as it was in 1969.”¹ How often we’ve been assured of those twin certainties: death and taxes!
After 33 years under a Social Security tax that has galloped from 2 per cent on the first $3,000 of earnings in 1937 ($60.00) to 9.6 per cent on the first $7,800 of earnings in 1970 ($748.80), why should anyone doubt that it’s here to stay? What these experts are really trying to tell us is that there must be something sound about a tax that yielded $26.6 billion of revenue in fiscal 1968 and $31.5 billion in fiscal 1969—sound enough to bet your future on it. And the reason why Social Security doesn’t have to build up reserves or be fully funded, as does a private insurance plan if it is to be actuarially sound, is that taxpayers are automatically drafted and have no way to avoid paying the Social Security tax. They simply keep on paying—and at ever-rising rates!
So, when the experts tell us about the soundness of Social Security, they aren’t talking about the actuarial soundness of an insurance program fully backed by invested reserves; they’re speaking rather of the certainty of taxes—saying in effect: There’s no more chance of a taxpayer revolt next year than there was last year.
The 1970′s will mark the 200th anniversary of the latest effective taxpayer revolt in this land of the free. Perhaps there is little chance that it might ever happen again.
Yet, the percentage of earned income of individuals taken by government in 1970 is about double the rate of a third of a century ago when Social Security began. How sound is it to bet your life on tax revenues that will have to be collected at that high and accelerative rate?
—FOOTNOTES—
¹ Russell R. Jalbert, “Sound Financing at Work,” in the December-January, 1970, issue of Modern Maturity, p. 39.
