A fourth of taxpaying U.S. households now pay more in Social Security than in income taxes, a new government study says.
Among black households 41 percent now pay more in Social Security than in income taxes; among female-headed households, 37 percent.
A second study shows that Social Security now provides nearly two-fifths of all the income of elderly people in this country, that it provides more than half the income of over two-thirds of the elderly and all the income of about a fourth.
Both studies were published in the most recent edition of the monthly Social Security Bulletin, which is put out by the Social Security Administration.
The figures do not deviate much from findings in previous reports. But they serve to underscore why Social Security has become so explosive a political issue in this era of austerity: an enormous part of the population is fundamentally affected by the giant system.
The tax figures take into account just the employe's half of the Social Security tax, which is paid half by employes, half by employers. Most economists assume that through a process of shifting, employes in effect pay both halves, in that employers look on their half as just another part of their total labor costs and subtract it from wages and benefits they might otherwise pay their employes.
Assume the employe ends up "paying" both halves and more than half of U.S. households pay more in Social Security than income taxes, the study says.
The Social Security tax looms larger for lower-income households than for higher. This is in part because it is a flat percentage, while the income tax is progressive, rising as income does; and in part because it applies on income only up to a specified cutoff point each year. For Social Security purposes, income over that point is tax-free.
In 1979, the study says, Social Security taxes tended to be higher than income taxes for families with incomes up to $9,000 to $10,000; above that point the income tax tended to retain its traditional position as the No. 1 tax.
The income study made these additional points:
* Among elderly households in 1978, the year of the data, 90 percent received Social Security benefits. Thirteen percent received other public pensions and only 21 percent received private pension payments.
* A fourth of these elderly households still had earnings, while 62 percent had income from assets, which was mostly interest income.
* On the other hand, this assets income accounted for only 19 percent of the total income of elderly people, indicating many had very little of it--and other studies indicate that most of this assets income goes to a relatively small percentage of the elderly who are the best off.
* Earnings produced 23 percent of the income of elderly people, pensions other than Social Security 16 percent and Social Security 38 percent.