ABSTRACT
This chapter shows how the Social Security tax on a taxable income of $20,000, and the maximum Social Security tax, have risen since the tax began in 1937. The employee's payroll tax, or Federal Insurance Contribution Act tax, was originally just one percent of taxable wage or salary income, and only the first $3,000 of income was taxable, making an initial maximum tax of $30 a year. To preserve solvency, revenues had to rise accordingly, and every liberalization was accompanied or followed by a tax increase. There are three ways to increase revenue: widen the tax base by extending Social Security to more occupations; raise the maximum taxable income; and increase the tax rate. Social Security's financial weakness will be creating simultaneous fiscal crisis and economic calamity. After the "trust funds" are exhausted, Social Security's deficits will be even deeper, and there will no longer be a stock of Treasury debt on hand to cash in to help cover them.
