June 9, 1997
Charleston, S.C. -- The Social Security system is in a crisis, and self-employed people know it, according to Bennie L. Thayer, president of The National Association for the Self-Employed (NASE). In a conference about the system's future sponsored by the Public Forum Institute, Thayer discussed the extraordinary burdens that Social Security places on the self-employed, as well as other factors that make reform so necessary for this group of workers.
"I wish I had a dollar for every time one of our members has called in with a question like 'How can I be paying twice as much in Social Security taxes as I am in income taxes?' or `How can I owe $8000 in Social Security taxes when I only cleared $5000?'," Thayer said. "The answer to these questions is that the self-employed get the worst deal in the country on Social Security taxes."
Thayer explained that while in 1970 and 1980, the self-employed paid the employer share of Social Security plus about two percent, today they pay the employer share, plus 7 percent. As far as overall tax rates, while employers and employees saw their taxes rise from 4.8 percent to about 7.6 percent, the self-employed got hit with an increase from 6.9 percent to 15.3 percent. Furthermore, the employee share of the Social Security tax is not tax-deductible.
Compounding this bad deal is the average low rates of earnings and savings that self-employed workers have, making between $25,000-$50,000 a year, with less than $50,000 in savings.
"The self-employed don't have any more money," Thayer continued. "And we're already double-taxed by Social Security. Something's got to give. We have to start talking about much more fundamental reform of the system."
Thayer recommended that a portion of Social Security funds be invested in high-quality stock and bonds. "I am not an expert on investment policy," he said. "But I do know that such investing will, over time, offer higher benefit levels for the vast majority of people -- if the investments are strictly regulated.
"The government bonds we buy with today's Social Security taxes are nothing more than a promise to tax future generations," Thayer concluded. "So if we start allocating some of that tax money into other forms of saving, we'll not only help ourselves, as future beneficiaries of Social Security, but we'll also help the people who will be paying to support the system in the future."
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