Note to readers: Someone in comments below mentioned the widely misunderstood Social Security Trust Fund. I am somewhat a wonk, and have written about such matters. (I realize that issues of aging have limited appeal, which is why I asked the younger Fauxlex aboard, to write about issues with broader appeal.) Rather than rewrite the piece on the Trust Fund, I am simply re-dating it. If all goes according to plan, it should appear below with the original comment thread intact. From 6/26/2018:
The above image is making the rounds on Facebook. Later in this post I will talk about the so-called “Social Security Trust Fund” and how it never was and never will be. For now I want to thank my friend Kevin for putting up his post directly below called A Crashing Success, as it offers an easy and early escape from this post about (cue violin screech) … taxes!!!
Go now, quickly, or prepare to be flooded with the conceptual abstractions that are used to justify the theft of our hard-earned money. The words “hard-earned” are important, as there are other forms of wealth that are easily owned by people who by pure chance slid down the right birth canals – trust funds, stocks and bonds, inherited wealth and Cayman bank accounts. The essential feature of taxation is that hard-earned money is heavily taxed, while the birth-canal funds are only lightly touched, if at all, by the IRS.
So journey with me now beneath the fold, or make your escape. The particular tax I am going to write about has a name you might know, one that sounds like a disease or the claw of a wild beast. It is called … “FICA.” From that word springs the myth of something called a “Trust Fund.”
No one understands the Internal Revenue Code. It is massive and complex. People who make their living preparing income tax returns thrive not so much on the complexity of the code, however, but rather on but on the flight or fright reaction in most people … it is taxes! Run away!
Thus does preparation of the simplest of tax returns involving wages and perhaps a little bit of investment return generate ungodly fees for tax preparers like H&R Block. I have long tried to convince people, to no avail, that their taxes are understandable and that they can easily do them without outside help. Basic income taxes are simple.
But simple or complex, my higher purpose here is to help the reader understand that the ultimate objective of the tax code is to keep regular people in chains. The tax system takes far too much money from working people – not just through our dual* system of income taxes, but also Obama’s “Affordable” Care Act as well. Though not technically a “tax,” being forced by ACA to pay exorbitant premiums to private companies for substandard health care is a burden that feels very much like a tax. Add all that to the student loan program, another racket, and we are kept in perpetual pursuit of the elusive carrot. All these things combine to assure us that the American dream remains, like the Trust Fund itself, a myth.
That is not an unintended consequence. It is the objective. In other more civilized parts of the world (and I do not know why this is so), health care and education are part of the infrastructure. Here in the U.S. they are part of the system of oppression.
*I say “dual” tax system, as working people pay two taxes, FICA, and regular income tax. The IRS Form 1040 is devoted exclusively to the income tax, ignoring FICA. By the time you fill out your 1040, they have already given you a haircut, having taken 14.2% of your earnings. They also (very deliberately) over-withhold regular income taxes from your wages, generating what they euphemistically call a “refund,” actually an interest-free loan to the government.
The most onerous tax on working people is partly hidden from us – “FICA” it is called, an acronym from the 1930s no longer important to decipher. Supposedly used to fund Social Security and Medicare, FICA taxes are thrown into the pot with all other government revenue. FICA is also used to foster the illusion that there is a thing called the “Social Security Trust Fund.” This is fiction. There is no fund, there is no trust. They tell us now that the Trust Fund has in it $2.9 trillion. That is an important lie, and they go to great lengths to make it seem real. It is not. The actual contents of the Trust Fund are $0.00. After all, a debt is only as good as the borrower. There is no intent to repay one cent of the Trust Fund, ever. Move along.
Former Federal Reserve Chairman Alan Greenspan claimed that the Trust Fund is real for two reasons: It is a legal claim on an asset, and the asset (the full faith and credit of the taxpayer) is real. Greenspan, however, overlooked a critical factor, intent to repay. It does not exist. It has never existed. Reality is this: The Trust Fund is nothing more than the official record of excess taxation of working people.
I am going to go over the mechanics of the FICA tax – please don’t shy away. It is easily understood. None of this is beyond anyone’s grasp.
The FICA tax as seen on our paychecks is a 7.65% deduction off the top of wages, money never to be seen again. But there is deceit behind it, as we are told that our employers “match” that tax by contributing an additional 7.65% to the government. This cannot be.
Think of it this way … no one can be legally responsible for someone else’s expenses. We can make gifts, but our employers do not make gifts. To have employees, they must pay wages. The “matching” portion of FICA that they pay is not their money, but ours. They had to budget that amount to hire us, and we have to justify it with our productivity. It is part of our wage.
So what happens with the “employer match” of the FICA tax is this: That 7.65% part of our wage is diverted from us before we ever see it and given to the government. It is a hidden tax, the kind of tax that governments love the most.
I won’t bore you with calculation of the real FICA tax on working people, 14.2%. If anyone is interested, I will expand on it in the comments. Just understand that when we got our first job and earned our first dollar, we already paid our first hidden tax.
The government is taking 14.2% right off the top of everyone’s wages. There is no way out, no deductions, exemptions or credits. The FICA tax does not appear on your Form 1040, though 7.65% of it turns up on your W-2. There are no deductions against it, no way to get it back once paid.
That is not a problem, you say, since we all have to pay it, right?
Not so. For fiscal year 2019 it is estimated that the government will collect $3.422 trillion, of which $1.688 trillion (49%) comes from income taxes, and $1.238 trillion (36%) from FICA. The two taxes together are a hefty one-two punch. FICA, taken from workers alone, almost equals the income tax, which is the only tax the wealthy (allegedly) pay.
On the left-hand column below is income that is subject to FICA, and on the right forms of income that are exempt:
Notice something? On the left is income of ordinary wage earners, on the right is income of the wealthy. Consequently, only working people are hit with a 14.2% tax on all income, while the wealthy for the most part do not pay FICA.
A side note, and a little insight into the true nature of the beast: We all know (or at least suspect) that the wealthy hide their money in tax havens and that little effort is made to repatriate it. Years ago congress was pulling its collective hair out over a serious problem – waitresses and waiters we escaping tax on their tips! Some working people might actually be getting ahead! (Again, cue violin screech.) They have since closed that diabolical loophole. Those goddamn greedy waiters got their comeuppance. Tips are now taxed. Meanwhile, Cayman accounts are untouched.
So, FICA supposedly finances Social Security. Is that program in trouble then? No. If we just get rid of the notion that it is funded by the FICA tax, it is fully funded now and forever by the general tax system. This includes government revenue from all sources, including FICA and regular income taxes, along with tariffs, fines, fees … one big pot of money. The purpose of FICA is not to fund Social Security and Medicare, but rather to hammer working people.
Add to that the fact that the currency is controlled by the Federal Reserve, or better said, under control of the oligarchs. Consequently (this took time for me to grasp), it is all one giant illusion – there is no national debt, no deficit. Those are scare words, nothing more. Everything is under control of those who control the currency. The scare words are useful, however, in that they are used to prevent reforms such as building our infrastructure, fixing health care or funding education beyond high school. We can’t afford those things, they tell us, because of the deficit, or the national debt.
What we have in our tax system is a fear-based system of social control. All working people pay the 14.2% FICA tax. Most of us are in the 15% income tax bracket. FICA is a first-dollar tax, the income tax a last-dollar tax. So most of us are paying 29.2% of our last-dollar in taxes. Add to that state and local income and sales taxes and advanced education costs. Add Obamacare premiums, and that first $7,350 in medical costs not covered, student loan debt, mortgages, car payments … it all amounts to this: Loss of job is a tragedy. Saving for the future? Hardly anyone does that, and to be kind, saving is next to impossible given the pressure we are under.
The purpose of the whole scheme is to keep us chained to our desks. Way back in time ordinary people came to the colonies under a system called “indentured servitude.” It never ended.
Of course, we can always make it to retirement and lay back and take it easy, right? The next segment of this post will deal with the final insult, another hidden tax, this on Social Security benefits. Congress, after fixing that dreadful problem of untaxed tips, went after retirement benefits.
Piece of Mindful 
All of a sudden my butt hurts.
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You do win the award for being the only person to read this piece. It is a brand new copy of Thompson and Reuters 2018 Tax Guide.
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Unread.
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It’s a great honor, but I can’t accept. Please don’t make me.
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Didn’t see pensions in your FICA lists, just traditional pensions. Is there a difference?
The wife and I are considering retiring. I’ve always had farm and ranch income but I’m considering leasing. I also have rental income, trust income (inheritance), and the wife has a nice pension.
Seems to me the only thing FICA will touch will be SS. Farm income will be offset by expenses and depreciation.
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Congratulations on retiring, if you go that way. Few people can do so comfortably. I did so Jan 1 of this year, and am no longer a CPA.
The only thing that concerns me on your list of income is leasing, as people who are in the business of leasing must pay FICA or self-employment tax, different names for the same thing. I suggest you consult someone about that, or do some personal research, and if you go that way construct the deal in such a way as to shelter your income from FICA. This is where attorneys can be useful.
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Boy howdy! You’re awesome. I could probably spend the rest of my life trying to understand financial things and fail. SO, I have a deep admiration for people who can understand economics, both the more obvious stuff and what I’ll call “occult” economics.
One thing I’ve always wondered about is money laundering. I’m sure that the principles your explain in your article could perhaps be transposed onto an issue like money laundering but, again, it would take me a while to do that.
In short, I’m very suspicious about some of my local, allegedly charitable organizations. I’ve become so cynical about so many things that I no longer even entertain the notion of giving to charity. My spidey sense tells me my donation will just end up in the Cayman Islands. And I’ve looked online at the 990 forms of some of the charitable organizations in my area. For instance, how in the heck do they always seems to have the same amount of money at both the beginning and the end of the year. In spite of all the events and fundraisers, as well as private donations and etc. With the president of the organization paying himself about $300,000 a year. I know it’s a non-profit organization, but where the hell does the money go?! It makes no sense!
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I wholeheartedly agree. I give my charitable donation to “real people.” One example is that I am an extremely generous tipper to hardworking people. I’m also generous with friends and family as well as trustworthy truthers.
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Excellent article Mark! I am aware of most of it now, but had no idea while I was still working. I’m currently reading F William Engdahl’s “Gods of Money” I am still early in the book, but his research is impeccable and all sources available at the end of each chapter. It outlines how these rich oligarchs took over banking and engineered the depressions….I didn’t even know there was a depression in 1893 and again in 1907. They lie, sell phoney bonds, took us away from using silver….so much new (to me) information. I know that The Federal Reserve can make money out of thin air….didn’t know they could also make it disappear…should be a no brainer, but that aspect shocked me for some reason. He also talks about how much some of the families “disliked” the other families, but decided that keeping it in the “family” was wise, thus so many marriages among the elites sons and daughters etc
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If you like to read fiction, I highly recommend Taylor Caldwell’s “The Captains and the Kings” which is about this very topic. It’s a great read and also fairly enlightening in what she (Caldwell) swears is based upon the absolute truth.
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I read that book many years ago, and it impacted me. But I’ve forgotten most of it now. Please expand.
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“The Captains and the Kings” would be loosely considered historical fiction, but is rife with conspiracies. The main conspiracy is that there was a group of about 10-20 men (no women) at the turn of the 20th century who controlled just about everything that was going on in the world. These men had no allegiance to a nation, cause, or political ideal. They only had allegiance to each other and the protection of their common interest — to increase their money and power. In the book’s Foreward, the author swears that such a group actually existed and that the Federal Reserve was this group’s coup de grâce.
It is a very enjoyable read and well-written, in my opinion.
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Truthful indeed! All of that is spelled out in Engdahl’s “Gods of Money” and it isn’t fiction. All these men cared about was power and money and they didn’t care that lives were ruined or that people died because of their greed. I’ll have to add “The Captains and the Kings” to my reading list.
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Well done, Mark, and thanks to you for exposing this fraud that affects the majority of commoners and wage-slaves–proof that slavery never truly ended. The deception lies in making everyone think they’re living a life of “freedom”, when in reality they’re still slaves, merely given a stipend to buy and pay for their own housing and necessities of life, rather than live on the Master’s plantation. The way I see it, “America” was/is a grand experiment, advertised around the world as a bastion of freedom to encourage enough hard-working laborers to immigrate, as they were needed to develop the land for crops and animals for food, build up the cities, work in the factories, buy goods, fund the banks and service the oligarchy. Once these workers became prosperous enough, the Federal Reserve was created and the Income Tax act implemented, followed shortly afterwards by the Social Security tax. I think that was the beginning of the end of the “American Dream” for most of the (bamboozled) citizens. Obamacare and the health insurance mandate was the final nail in the coffin for so many.
Sure, there is still some “freedom”…to choose your fancy and decide how to spend your wages. We’re overwhelmed with that kind of “freedom”: to choose what type of housing we want to live in, which university to attend, what model of car, which store to shop at, what brand and style of appliances, furniture, clothing, phones, computers, restaurants, entertainment…even mundane necessities like food–for health or for taste?…organic or GMO?–and even down to the toilet paper–“do I want the more practical butt-scratching brand, or the cushy-soft stuff that shreds and leaves pieces behind?” We’re even given a rather large selection of easily-accessible addictions to choose from. “Have it YOUR way!” WooHoo! Gotta love that “freedom”!
And this is why I choose not to “work for The Man” anymore, having resigned from that (heavily advertised and indoctrinated) lifestyle to live very simply and self-sufficiently–much like Henry David Thoreau wrote about in Walden Pond. Do I have the nice possessions that others have? No, mostly just what’s truly necessary…but that’s OK, because I’m unencumbered by the everyday requirements such as mortgage payments/rent, property taxes, insurance, large stacks of “payment due” notices, alarm clocks, time clocks, traffic jams and the stress that accompanies all that insanity. Living like that made me so ill, I just couldn’t do it any more; it sucked the life out of my mind, body and soul to the point that I had no choice. Now I work mostly when I want to, and, in fact, haven’t paid any FICA or income tax since 1996. And the IRS and state tax collectors don’t bother me anymore, as I have nothing they want and too little to give. Life is better this way…
(Oh my! I didn’t mean or intend for this to turn into an essay, it just came out that way. I think I’ll leave it as is. And thanks for having me. 🙂
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Carrie, I enjoyed you “essay” immensely!
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Carri, I think what you did takes courage. I am still in the grid, but am fully aware that my “money” in “banks” can evaporate and that my credit cards can cease to function and that TSA can suspend my travel rights. I am living in a dream world.
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You wrote that just as the number of followers reached 911 (queue violin screech.)
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Yikes! My goose is cooked. (Do you like goose?)
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Mark, you aren’t living in a dream world.
We are all in jeopardy of having those things happen, but we are at least awake and aware that it can happen. I think you/we are living knowledgeably by knowing the truth and I pity those that are still living in a dream world, unable to grasp the dire reality of how this world works.
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I have a close friend who’s husband worked for a company via a contract (this was back in the late 80’s) They had no idea about the employer FICA match. Since my friend was on contract, the company did not pay the “matching” benefit….after several years, the IRS discovered this. This family, barely able to make ends meet owed back FICA plus penalties and interest. They were “in hock” to the IRS for years.
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Doesn’t 7.6 + 7.6 = 15.2?
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7.65 x 2 = 15.3, not to correct you, but to show the calculation below.
Indeed we all pay 15.3%, but of what? The answer is that 7.65% of our wage, the so-called employer match, is hidden from us. It needs to be added back to our wages. So instead of say, $100.00, our total wage is $107.65, of which we only see $100. So the true percentage of tax is 15.3/107.65, or 14.2%.
If you want evidence of this, take a look at IRS Schedule SE, which is the form that self-employed people used to calculate their FICA tax, even though it is not called that. On line 4 they adjust the 15.3% rate by 92.35%, pretty much the reciprocal of what I did above. 15.3% x 92.35% = 14.1%, close enough, and the same idea.
Click to access f1040sse.pdf
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Thank you for helping me understand that better.
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It is not an easy concept, something we accountants can do but which normal people have difficulty with.
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It’s true there is no trust fund. The Supreme Court has ruled three times on the subject, stating that SS is just a welfare scheme, and one has no vested interest in it. Congress can shut down the whole scheme tomorrow and no one would rightfully have any recourse.
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Not just a welfare scheme, but also a Ponzi scheme.
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The American people have no idea they are paying the bill. They know that someone is stealing their hubcaps, but they think it is the greedy businessman who raises prices or the selfish laborer who demands higher wages or the unworthy farmer who demands too much for his crop or the wealthy foreigner who bids up our prices. They do not realize that these groups also are victimized by a monetary system which is constantly being eroded in value by and through the Federal Reserve System. G. Edward Griffin.
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I only can speak for Europe, but I suppose USA will use the same tricks. This “funds” are but pyramids where the money payed in is immediately being spend on current issues. There is no reserve. When per impossible one day no one pays in anymore, then there is no money for anybody. They call it “funds” to suggests that they somehow invest your money so you can profit from it in future, but the money you’ll then get is always the money from the then current payers. The same applies for any insurances.
As for taxes, it doesn’t really matter how do you call them. It’s a part of a system where they always let you keep enough to make you go to work every day and keep you busy until you can be replaced by younger ones. Then you’ll be allowed to “retire” always getting less money than you thought you would get but usually still getting more than you really need. To call it “stealing” is not really appropriate because the money you get belongs to them and they just give you your part and only let you know how much you did for the society while working for yourself. Imagine renting a flat where you have to clean the stairways occasionally. That’s the taxes for the commune.
In the past people could live off the grid, independently, which obviously wasn’t as good as living in the grid we call society. So the grid become bigger and bigger. One day TPTB decided to close the gap and just force everybody to live in the grid. Some may still try to live off the grid but it isn’t really fun, is it?
If you have a job, you are part of a very complicated system where you do something this system needs. Outside the system the same work would be worthless. It is the system which gives you work. If you don’t have a job you’re still a part of the system where others pay for your expenses. Of course you may complain and wish to get more out of it but whatever you get, it is the system which gives it to you. Calling it a “fraud” isn’t appropriate because it actually is a fraud you do to yourself pretending not to know, what it is.
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Once instinct and spirit are lost, voluntary slavery can be rationalized easily as a means of survival. Sadly, that self-denial always seems to lead to something quite different than living life with meaning. The collective psychosis that gap creates fuels the hell-bound train to nowhere — drifting and drifting.
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that’s very romantic, Steve. Why should we give away something real for something abstract like “life with meaning” what ever that means to you. Rational species aim to improve their fate. That’s why we once chose to create a society where we share and care. It’s called pareto-superior. The globalized society is just an improvement of this. Every herd has a leader. That does not mean, the others in the herd are slaves. The term slave is a hoax. There never was any slaves like we’ve been told. It does not work that way. I once learned the Pyramids of Giza were build by slaves. There are lots of books describing this scenario. If they were, they wouldn’t stand for 5000 years. Slaves wouldn’t do their jobs right and the pyramids would collapse. Yet still they are there, perfect in size and shape. I’ve been there and saw that myself.
You are part of the system too, Steve. You’re even profiting from it more than others. Complaining about it and calling it “live without meaning” is self-denial indeed.
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“If they were, they wouldn’t stand for 5000 years. Slaves wouldn’t do their jobs right and the pyramids would collapse. Yet still they are there, perfect in size and shape.”
It’s doubtful the pyramids are even that old. At best, they could be 4-500 years old, but not 5,000. Knowing that much of recorded human history is a lie, who’s to say ‘ancient’ Egypt was anything like we’re told?
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Always grinding away eh frauline?
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