Evening star. [volume] (Washington, D.C.) 1854-1972, 1944-12-03
Payroll Tax Issue
To Affect Millions
Writer Tells of Differences OF
Views of Increase
By OtDen L. Scott.

By ODen L. Scott.
The average individual has something.
more than an immediate pocketbook
interest in the payroll tax increase that
is scheduled to take effect on January
/. Involved Is larger deduction from.
the pay envelope Of each worker and p
larger contribution by employers. r..
Also involved. however, is a rather,
basic principle underlying the present
old-age insurance system from which,
millions Of workers expect to draw
benefits after they reach the age of IS.
This principle relates to the question of
whether the system to which workers
are contributing is to be one of old-age,
annuities of whether it is to be no more,
than a plan of old-age assistance not
related to the premium, paid in taxes,
which now is the center of argument.
The present payroll tax Is per cent.
per cent on employers and per cent :
on workers. The income from the q.
present tax is amounting to about ST.
400 ,000,0 900 year. Benefit payments to
those retiring will total no more than
$3.50, 000, 900 next year and will not be
as large as current tax collections at
the present rate until 10 years from
now. There already is a reserve fund
of 5000 100000. AZ
Under these circumstances, Congress
has opposed doubling of the payroll
tax to be followed by TRIPPING of that.
tax by 1913. 1t has laid down the
formula that the old-age insurance
trust fund should be held down to a.
level three times larger than the ex-
pected benefit payments for any year in
the highest of five year period On this
basis the fund today is large enough to
fulfill the formula for the next 20 years,
The White House and the Social Sc
curity Board insist, however, that taxes
must go higher and that vast reserve
fund, approaching $4,000, 900 900 must
be created in the years ahead. They
are not impressed by the present large
total of old-age insurance income in re-
lation to benefit outgo The reason is
that the present situation Is regarded
as deceptive. If old-age insurance in
reality Is to be insurance, and not Just
form Of old-age assistance.
The point is that the great bulk Of
workers who are building stake in the
old-age insurance trust fund are young
workers. 1t will be 20 or 80 or 40 years
before they retire. At the same time
the number of old people drawing bene-
nts will accumulate. It Is estimated
that 20 years from now more than g.
100000 persons will be drawing old-age
Dement'S and 40 years from now the
number will be around $4,000 900. Bene-
Mt payments which now are around
S250,0OO,O00 year will rise gradually
until they exceed $1,000, 100000 year.
This means that taxpayers of the
future will be called upon to pay taxes
equal to 10 or IL per cent of income 5
or per cent each for employers and
workers If younger workers of TODAY
are to receive the benefits which they
are being promised. The Social Security
Board view is that taxpayers of the
future may not feel under any obliga-
ton to make good on these present
promises, the workers in this period
DO not contribute their share on a basis
that will entitle them to benefits as a
matter of right.
Congress, on the other hand, prefers
to let the future take care of itself
and to avoid as long as possible the
unpleasant effect of another tax in
crease
1t is argued that the so-called old-age
trust fund Is not fund in a real sense
at all. because the dollars paid into it
are used for current operating expenses
OF the Government and are not in
vested In income producing securities.
The fund, however, is recognized as part
OF the direct debt of the Government
and Is backed by the taxing power Of
the Nation, which is unlimited.
The real question involved in the
argument over payroll taxes is not
whether the Old Age Trust Fund is or Is
not real insurance fund, but whether ;
the commitment made to workers
OF today will be fulfilled by the tax
payers of the longer-range future. It Is
whether today's workers can expect to
draw old-age benefits on the ANTICIPATED
scale unless they make payments them.
selves which entitle them to these BEN
eflts. If they do not make payments
emitting them to the payments they
are scheduled to receive, then the tax
payers Of 1860 or 1880 may balk at the
burden of providing the benefit pay
ments when they are due. -.
= 4 4
Even now this country has two old.
age retirement systems One is a State
system to which the Federal Govern
ment makes matching contributions.
Under this system the INDECENT aged are
given monthly payments after proving
that they are destitute and after they
have given up whatever property they
have owned. That is a system of relief
and it already is costing the Federal
Government around $500 900, 900 a year.
Old-age insurance was to be a retire.
ment system based upon payments by
workers which would entitle them to
retirement benefits as matter Of right.
point now is made by those who
sponsored this system that it will de-
generate into something like the State
system Of old-age assistance for INDECENT
persons unless it is adequately supported
by those who expect to draw BENEFITS
from it. The further point is made
that grave injustice is being inflicted
upon the millions of workers outside the
old-age insurance system If they are
going to be taxed In the future to paw