Thinking Social Security on Tax Day

April 15, 1999

As millions of Americans scramble to file their taxes today, it is worth remembering that the biggest tax burden faced by most American's is not their federal and state income taxes -- but their Social Security payroll tax. In fact, more than three out of four Americans pay more in Social Security taxes than in federal income taxes. That could become even worse, since program is facing huge unfunded liabilities: Social Security's trustees' predict that payroll taxes might have to rise from the current 12.4 percent to roughly 18 percent in order to pay all promised benefits. Some more pessimistic projections suggest that the payroll taxes could exceed 40 percent by the middle of the next century.

This huge tax burden is made even worse by the poor rate of return that young workers can expect on their taxes. Indeed, many young workers can actually expect a negative rate of return on their Social Security taxes -- they will actually lose money in the program.

Tax Day reminds us of the enoromous tax burden facing American workers and families. It should also remind us of the need to reform Social Security.

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