Evening star., 1949-05-09

League Of Women Voters
Social Security Trust Fund
Held 10 Re On Sound Basis
Te IA. K1tsas et ne stat
Your editorial OF May capltoned Pay
ING for Social Security" repeats a miScan-
ception which viii cause needless perturha-
tion among many OF those who have paid
and are paying social security taxes TOW ard
retirement annuities and survivors benefits
You speak Of the double taxation defects
in the present set-up." and explain th&t
the extra-taxation prospect arises FROM
Governments decision to use the surplus
Social Security trust fund e 10 pay eur-t
rent general expenses Of the executive ss,Ae-
lshment. As security for this borrowing the
Government has deposited It's bonds With
the trust fund. But. as Mr., Hoover poln,edA
out in q letter TO Chairman Doughton of
the House WAYS and Means Committee
these debts 70 the trust fund eventually must
be repaid. The money inevitably siil CONE
from the pockets of the Taxpayers
Of whom already have contributed TO thel
Social Security fund through payroll de-
ducttons -"
This line OF reasoning eonfuses the Social
Security Tax. which is levied on part Of the
population for the specific purpose OF pay
ing retirement and survivors benefits with
general taxation used for the purpose among
others. OF carrying and. We may hope. grad
ually retiring the national debt.
Bonds PAY for Wars
The debt. as you know. is due principally
10 two world wars some OF it, to deficits
incurred during the depression OF the TIM
ties. During the war and depression years
spending outran tax-gatherina 50 that bonds
were sold. These bonds were sold 10 insur-
ance companies. banks. TO you and 10 me
Some were sold TO the trust fund II they
had not been sold TO the trust fund they
would have been sold TO insurance compa-
MES. banks and other investors. The net
effect on the national debt would be the
same. The debt would still be around $3.50
billion. II will cost the general taxpayer
no more to redeem securities held in the
trust fund than II would cost them 10 re-
deem a like amount from insurance CON-
panies. When they do redeem them. they
viii be paying for part OF The war. They
viii not be paying a new Social Security
tax The purposes Of the two taxes are
entirely different. They are no more double
taxation than our income tax and the excise
tax we pay on q new car
Perhaps 1t is the use OF the word tax"
to indicate what Is essentially a."premium
to purchase an annuity" that has confused
Mr.. Hoover and you. II We think OF the
u
some workers for their own retirement or
survivors BENEFITS. 1t Ii apparent that pre-
miums are paid only once.
The Advisory Council on Social Security
to the Senate Committee on Finance some
members Of which have been students OF
Social Security since its inception gave
special attention to the double taxation"
charge. The council reported
Denies Double Taxation.
The investment of the old-age and sur
vivors insurance funds in Government se-
curities does not mean that people have
been or will be taxed twice for the same
benefits. rs has been charged The follow
ing example illustrates this point: Suppose
some year in the future the outRo under the
old-age and survivors insurance system
should exceed payroll tax receipts by $780,
100000. II there were then 81. 900 900 900
OF United States 2 per cent bonds in the
trust fund. they would produce interest
amounting to 500 900 900 a year. This in
terest would. OF course. have TO be raised
by taxation. But suppose there were no
bonds In the trust fund. In that event
500 100000 to cover the deficit In the old
age and survivors insurance system would
have TO be raised by taxation. and. In addi-
tion. another 500 900 900 would have TO be
raised by taxation to pay interest on IS 00o.-
0000 of Government bonds owned by
someone else. The bonds would be In other
hands. because II the Government had not
been able to borrow from the Old-ARe and
Survivors Insurance Trust Fund. 1t would
have had 10 borrow the same amount from
other sources. In other words. the owner
ship of the SIS 900 600. 900 in bonds by the
oid-age and survivors insurance system
would prevent the 500 900 900 from having
to be raised twice-ouite the opposite from
the double taxation that has been charged.
] believe 1t Is important 70 correct the
erroneous impression that there Is some
thing TO be CLOSED over or explained away"
about the Oid-Age and Survivors Insurance
Trust Fund. Virtually everyone who works
for pay in Washington has a stake In this
fund or In the Civil Service Retirement Fund
or Railroad Retirement Fund or the uneH-
pioyment Trust Fund or the Government
Life Insurance Fund The afrpiuses from
all these programs are invested In Govern
ment securities In identically the same man.
ner as the surplus from Social Security
taxes. To question the soundness OF these
funds Ia to raise doubts unnecessarily In the
minds OF thousands regarding their future
security. WILLIAM l.. MITCHELL.
Acting Commissioner. Social Security
A Spokesman for the Yeunger Artists
Thanks Csreeran Gallery fer @Bessts"
To the Editar sf Ths star.
I wish through your paper 10 take this