At present, federal “mandatory” programs, which include Medicare, Social Security and roughly 77 welfare program, account for 57% of the entire federal budget. Social Security is by far the largest federal expenditure, which is projected to cost $848 billion in 2014 and at least $11 trillion over the next 10 years. It is clear that we will never control spending and bend the trajectory of our fiscal insolvency without offering comprehensive and effective reforms to Social Security.
However, the budgetary cost of this program is by no means the only pernicious aspect of our burgeoning entitlement state. Under the current system, the federal government has complete control over our personal retirement. Their monopoly on 12.4% of our earnings (on the first $113,700 of income) undermines savings, investments, and personal ownership – some of the most cherished values of a free and prosperous society.
To add insult to injury, the federal government taxes the Social Security benefits of seniors, even though the money had already been taxed. Moreover, the more a senior earns in private income, dividends or interest while receiving Social Security, the more they are taxed. Hence, in addition to the double taxation, the federal government has created a perverse incentive for seniors to continue working, if they desire to do so.
Today, a pair of conservative champions in the House, Reps. Thomas Massie (R-KY), Jim Bridenstine (R-OK), and Ron DeSantis (R-FL) have introduced a bill, H.R. 3894, to repeal this double taxation on Social Security benefits. As Massie noted, this bill will prevent Congress from using this ill-gotten revenue to grow government while pretending to protect the notional Social Security Trust Fund.
Again, conservatives should not only discuss the budgetary problems with Social Security. Many analysts only focus on the “austerity” solutions, such as means-testing benefits and raising the retirement age. But they fail to address the broader problem of government controlling and squandering our retirement. And ironically, Social Security is already means-tested in several ways, one of which is the taxation of benefits on a graduated income scale.
As we work to push for more choices in retirement security, the least we can do is repeal the harmful tax on Social Security benefits.
Cross-posted from The Madison Project