South Carolina Senate Fact #13: Social Security Has a Hidden Tax and Low Returns

Your paycheck may lead you to believe that your Social Security tax is only 6.2 percent. Don’t be fooled: Social Security payroll taxes are actually 12.4 percent, because employers must also pay an additional 6.2 percent tax for each employee’s salary. Most economists agree that this employer-paid portion of the tax is in effect a tax on individual workers and if it didn’t exist, those funds would otherwise be passed on to the worker in the form of a higher salary or benefits.

In fact, Social Security taxes are already so high that almost four-fifths of Americans pay more in payroll taxes than they do in federal income taxes. The program keeps many workers from creating a nest egg of their own by reducing disposable income—and it currently provides a measly two percent rate in return. And Social Security will be an even worse deal when it runs into the red in 2018, forcing massive tax increases and benefit cuts.

That’s why South Carolina U.S. Senate candidate Representative Jim DeMint supports Social Security reform through Personal Retirement Accounts (PRAs) that workers own and control. PRAs will offer an estimated benefit equal to 130 percent of currently promised benefits. PRAs will allow workers to build a real nest egg that they can pass onto their children, unlike your Social Security contributions which the government keeps when you pass away, even if it is at 65 after a live of contributions and not a penny in return. Moreover, these accounts will grow with the economy and avert the retirement security crisis.

Inez Tenenbaum, on the other hand, has no plan for Social Security reform. Instead, she is resorting to baseless attacks and meaningless rhetoric against PRAs. Why won’t she let workers save for their retirement with PRAs?

The choice on Social Security is clear: Jim DeMint’s plan will increase benefits and save the program—and Inez Tenenbaum offers the same raw deal.

For more information, please visit http://www.freedomworks.org/southcarolina/