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How to Save Social Security
Simple, but significant defects and contradictions in federal accounting of revenues and expenses of US Treasury and federally managed trust funds (i.e. Social Security Retirement) have fostered levels of debt and deficits that are beyond control. US government accounting is so convoluted and complex that it allows the government to spend money it hasn’t received, doesn’t have and cannot account for. Commingling FICA & FIT taxes at the source has led to erroneous accounting at the federal level.
I have researched, analyzed and reported on my website uspublicpolicy.com all aspects of the Social Security program. Legal defects discovered in The Social Security Act of 1935 have caused the most popular social program in the country to evolve into a federal Ponzi scheme.
Specifically, that Act and succeeding related laws, requires:
1. Equal contributions by employees and employers to fund the Social Security retirement trust fund.
2. Employee contributions are not deductible from Federal Income Tax returns.
3. Employer and Employee contributions are deductible as Business Wage and Tax Expenses from gross profits to determine taxable income.
a. Business Expense Deduction of employee FICA and FIT Taxes as Wages
IRS Publication 535 QUOTE: If you have employees, you must withhold various taxes from your employees' pay. Most employers must withhold their employees' share of social security and Medicare taxes along with state and federal income taxes. You may also need to pay certain employment taxes from your own funds. These include your share of social security and Medicare taxes as an employer, along with unemployment taxes.
You should treat the taxes you withhold from your employees' pay as wages on your tax return. You can deduct the employment taxes you must pay from your own funds as taxes. You pay your employee $18,000 a year. However, after you withhold various taxes, your employee receives $14,500. You also pay an additional $1,500 in employment taxes. You should deduct the full $18,000 as wages. You can deduct the $1,500 you pay from your own funds as taxes. UNQUOTE This means employees pay income taxes on the Contributions (FICA tax). The US Constitution authorizes a tax on income. It does not authorize a tax on a tax. Further, it provides a legal means for employers to get tax refunds of approximately 1/3 of the FIT & FICA taxes confiscated from employee paychecks.
4. Trust Fund assets (or surplus Contributions) can only be invested in special US government debt obligations not sold to the public. This provision allows government to spend the surplus cash and place US Treasury IOUs in the Trust Fund. The Trust Fund is not a valid fiduciary managed trust fund with marketable assets. It is a means of accounting to determine benefits and as a record of how much the US Treasury owes the trust fund.
Systemic defects in the law and irreconcilable cash-flow accounting defects between the US Treasury and the Social Security Trust Fund administrators conceal the truth about the present and future status of OASI trust fund assets. Actual trust fund assets and revenues to the US Treasury are conflicted.
Without immediate correction of these basic legal and accounting defects, the President’s debt and deficit commission will lead to further public misunderstanding. If adopted, the commission’s recommendations will perpetuate, not solve, the debt/deficit problem and further jeopardize a sustainable Social Security retirement system for our kids and grandkids.
Recommendations
1. Change law so that only cash and marketable investments can be placed in the OASI Trust Fund
2. Reconcile US Treasury and OASI trust fund accounting conflicts so net cash flow accounting between collections and expenses is identical.
3. Discontinue the Business Wage Expense deduction of individual FIT & FICA taxes.
4. Transition away from the deduction of interest expense on all federal tax returns.
Summary
There is much more to be done to put US fiscal and monetary policies on a new track. It is the time to put the future of this Great Country before all other interests. Failure to act now presents the greatest challenge and threats to national security and future prosperity this country has ever confronted.
John T Koraska
Tyler, Tx
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The best intentions of 100 wise men cannot solve a problem they cannot identify. John Koraska December 5, 2010
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