Monday, August 31, 2015

The give and take of Social Security, 80 years later

In case you missed it, the nation’s Social Security system program turned 80 on Aug. 14. It was controversial when President Franklin D. Roosevelt launched the program and it remains hotly debated to this day.

One extreme compares the program to a Madoff-type Ponzi scheme while the other end of the spectrum believes it’s not only a great public program but also that its benefits should be expanded. In other words, even after 80 years the Social Security controversy remains unsettled.

Yes, I have concerns about Social Security, essentially because of the underlying mathematics. People are living much longer today and roughly 10,000 people retire every day. That means there are going to be a tremendous number of benefit checks going out even as wages remain somewhat stagnant for those still working.

Meanwhile, active workers today receive a statement that informs them there will only be enough money to pay 77 percent of projected benefits. Is it any wonder so many younger people have doubts about the program?

A recent AARP poll shows that 73 percent of people doubt Social Security will be able to pay promised benefits. So, while the big picture of the program continues to be debated, I have two comments about the program that seldom make the headlines.

One concern is that many people overlook the fact that up to 85 percent of their Social Security benefits are subject to income taxation when they’re retired and receiving benefits.

I find this to be quite bothersome. During your working years you‘re paying income tax on the money withheld from your paycheck that goes into Social Security. Then you’re taxed again when you collect Social Security. That is double taxation, plain and simple. It wasn’t always this way, but in an effort to strengthen the program the Greenspan commission suggested this provision and it was signed into law in 1983.

My other concern is the seldom-discussed fraud that Social Security attracts. We’ve all read about identity theft. It’s a real issue in our society. In fact, a lot of sensitive personal information was recently stolen from the IRS coffers.

The Office of the Inspector General is finding out that identity theft is even a problem for the deceased. As a society, we generally celebrate the elderly, and rightfully so. The Gerontology Research Group recently concluded there were fewer than 50 people over the age of 112 worldwide.

Yet, from 2006 to 2012, nearly 67,000 individuals filed tax records where the names on the earnings report didn’t match the names associated with the social security numbers. For the same time period, more than 4,000 employers made E-Verify inquiries using nearly 3,900 Social Security Numbers that belonged to someone born before 1901. Clearly, criminals are using Social Security numbers of the deceased for fraudulent purposes.

Fraud is not just a problem for households and corporate America; it’s also an issue for Uncle Sam and the Social Security program. The statistics prove it.

As the debate intensifies over how to strengthen the program, I hope improving the record keeping and monitoring cash outflow is part of the discussion. A more efficient program could result in more income for retirees or lower taxes for workers.

As a nation, we want our elderly to be able to live their lives with dignity. Although it’s controversial, the Social Security program is part of the equation. But when life ends, Social Security numbers need to be permanently retired and kept from being used fraudulently.

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