Social Security not an annuity contract

Michael O. Kreps, Las Vegas

Monday, April 15, 2013 | 2:01 a.m.

In a recent letter, Gilbert Eisner stated that Social Security is an annuity contract between the wage earner and the “most responsible insurance company in the world, the U.S. government.” Social Security is not an annuity contract but instead a mandatory tax on a citizen’s earnings. It is carried out through the payroll tax.

Some annuities can be transferred after death. When you die, your Social Security benefits cease in most cases. Social Security should be considered to be only a part of one’s retirement. Unfortunately, more than 60 percent of people rely on it as their main source of retirement income.

In 1937, the Helvering v. Davis case (over the legality of Social Security) was brought before the Supreme Court. The government argued that Social Security was legitimate because it was a tax on the citizens.

The court ruled in favor of Helvering, the commissioner of the Internal Revenue Service, saying the federal government had the right under Article 1 of the Constitution, which gives Congress the right to “lay and collect taxes. ...”

Eisner stated that the Social Security will pay out 100 percent until 2030. According to the Social Security statement sent to recipients, the funds in 2033 will pay out only about 75 cents for each dollar of scheduled benefits unless changes are made.

If you contact the Treasury Department, officials will tell you that they do not count the IOUs in the so-called Social Security Trust Fund as an asset on America’s accounting books.

The real story is that the trust fund is made up of IOUs, and that money will come from future borrowing by the United States.