The Social Security and Medicare Scams
 by Laurence Vance

Charlotte Cowles is a financial advice columnist for The Cut,
 “a New York Magazine site dedicated to women’s lives and interests, 
including politics, work, money, relationships, style, and parenting.” 
She recently lost $50,000 when she fell for a scam,
 put that amount in cash in a shoe box, and handed it over to a stranger
 that she was duped into thinking was an undercover CIA agent.
The scam she fell for is not that unusual. According to the Federal Trade Commission (FTC),
 consumers reported losing nearly $8.8 billion to scams in 2022. The FTC
 received fraud reports from 2.4 million consumers. The top five scams 
were imposter scams; online shopping scams; prizes, sweepstakes, and 
lotteries; investment-related reports; and business and job 
opportunities.
Not mentioned by the FTC or reported on by any magazine is that the 
federal government operates two of the biggest scams that have deceived 
Americans for decades: Social Security and Medicare.
Instituted during the New Deal of President Franklin Roosevelt in 
1935, Social Security is the federal Old-Age, Survivors, and Disability 
Insurance (OASDI) program that provides monthly benefits for retirement,
 disability, survivorship, and death to about 65 million Americans, 
including survivors and dependents, making it the largest federal 
domestic program.

Instituted during the Great Society of President Lyndon Johnson in 
1965, Medicare is government-funded health care for Americans 65 years 
old and older and for those who are permanently disabled, have end-stage
 renal disease, or ALS (Lou Gehrig’s disease). About 65 million 
Americans are enrolled in Medicare, and it is the second-largest federal
 domestic program.

The Federal Insurance Contributions Act (FICA) of 1935 (amended in 
1965) imposes on every person’s gross income an employee payroll tax 
designated for Social Security and Medicare, with matching contributions
 from employers. The Self-Employed Contributions Act (SECA) of 1954 
requires that self-employed individuals pay Social Security and Medicare
 tax on their net earnings if they are at least $400.

Social Security is funded by a 12.4 percent payroll tax (split 
equally between employers and employees) on the first $168,600 of 
employee income. Medicare is funded by a 2.9 percent payroll tax (split 
equally between employers and employees) on every dollar of employee 
income. Employees (but not employers) pay an additional 0.9 percent 
Medicare tax on wages over $200,000 for individuals and $250,000 for 
married couples filing jointly. Self-employed persons pay the full 12.4 
percent Social Security tax and 2.9 percent Medicare tax but receive a 
tax deduction equal to 50 percent of the amount of payroll taxes they 
paid. They are also subject to the additional 0.9 percent Medicare tax, 
if applicable.

Although labeled as such, these taxes are anything but 
“contributions.” Employers who don’t properly withhold Social Security 
taxes face fines and imprisonment. Although you can opt out of Social 
Security and Medicare by not signing up for them when you are eligible 
in your 60s, you can never opt out of having to pay Social Security and 
Medicare taxes your entire working life. And no one is entitled to get 
any of his “contributions” back should he decide not to enroll in Social
 Security or Medicare.

Social Security and Medicare taxes withheld from paychecks are not 
invested or deposited in an account with the taxpayer’s name on it, and 
there is no real trust fund or physical lock box where these taxes are 
set aside for future use. All payroll taxes collected end up in the U.S.
 Treasury along with personal and corporate income taxes, estate and 
gifts taxes, and excise taxes. Social Security and Medicare benefits are
 paid out of current government revenues.

The Supreme Court has ruled that no one is entitled to receive Social
 Security or Medicare benefits because he “paid into the system” his 
whole working life. In fact, there is no correlation between payroll 
taxes collected and Social Security and Medicare benefits paid. Congress
 could at any time raise or eliminate the Social Security wage base 
and/or increase the payroll tax rates for Social Security Medicare (or 
both) on employers or employees (or both) while not changing benefits a 
whit.

Social Security and Medicare benefits could be reduced at any time. 
Benefits for both programs could be means tested. The retirement age for
 Social Security could be raised. The eligibility age for Medicare could
 be raised. Cost-of-living adjustments for Social Security could be 
reduced or eliminated. Medicare could eliminate coverage for certain 
medical procedures, raise deductibles, and/or increase co-payments. And 
payroll taxes could be raised at the same time.

Social Security and Medicare taxes exist simply for the purpose of 
raising revenue. If the taxes extracted from Americans’ paychecks were 
called by the government simply “payroll taxes,” instead of Social 
Security and Medicare taxes, then the fact that these programs are just 
welfare programs would be quite evident.
Don’t be scammed by the government, politicians, and the AARP about 
Social Security and Medicare. View them for what they are: 
intergenerational income-transfer schemes and wealth-redistribution 
programs.