# social security tax **URL:** \ **Category:** Factual Questions\ **Created:** [December 10, 2013, 12:39am UTC](https://boards.straightdope.com/t/social-security-tax/675937 "2013-12-10T00:39:28Z")\ **Posts on this page:** 18\ **Page:** 2
**Author:** ![barbitu8](https://avatars.discourse-cdn.com/v4/letter/b/839c29/32.png) [@barbitu8](https://boards.straightdope.com/u/barbitu8)\ **Post date:** [December 10, 2013, 10:25pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/21 "2013-12-10T22:25:35Z")
Social Security is not insurance. It is a tax. Or so SCOTUS held some time ago, but I do not have the cite. If it were insurance, it would be unconstitutional. I know it is referred to as OASDI by the federal government too, but the government has no power to engage in insurance. The government can tax but cannot insure. ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [December 10, 2013, 11:25pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/22 "2013-12-10T23:25:05Z")
> [@newme](#): > > This is not correct. [The current rate is 12.4%, split between employee and employer.](http://ssa-custhelp.ssa.gov/app/answers/detail/a_id/240) Half of 12.4% is? Perhaps **friedo** misspoke but I don’t think he believes that the employee pays 3.1%. > [@newme](#): > > What happens to Employee, Employer A, and Employer B in the following scenarios? > > Scenario 1: Employee works concurrently for Employers A and B, earning $113,000 annually from each. How much does each person pay (% wise) per paycheck, and how are refunds handled? > > Scenario 2: Employee works six months for Employee A, earning $113,000 in that time. Employee then goes to work for Employer B. Will Employer B deduct FICA from the paycheck? If so, will both Employee and Employer B have to file for a refund for the respective amounts deducted? I’ll let someone else answer the specifics, but yes there are provisions to be refunded your contributions. Any tax software should handle that. Form 1040, line 69. IIRC though, it is unlikely that Employer B will know about the contributions for A, so both do 6.2% of net income contributions up to the limit. I’m not sure they could even opt not to pay in unless it is some job-related exception. I don’t know how/if the employer gets refunded, or how they can find out if one is due. > [@Bone](#): > > Collectively, the OASDI (Old Age Survivor Disability Insurance) and Medicare portions make up what is known as Social Security. In my experience as an employer we’ve referred to it as a payroll tax. This is different than an income tax withholding. While the 6.2 OASDI portion is limited, the Medicare portion of 1.45% for both the employee and employer is unlimited and has no cap. Isn’t it: OASDI describes the taxation portion of SSA, and is often called “Social Security” in shorthand, or treated as synonyms. When you add that to Medicare, they come under the umbrella of “FICA,” or “SECA” for self employed, but Medicare isn’t considered to be part of SS. ---
**Author:** ![Bone](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bone/32/407_2.png) [@Bone](https://boards.straightdope.com/u/Bone)\ **Post date:** [December 11, 2013, 12:02am UTC](https://boards.straightdope.com/t/social-security-tax/675937/23 "2013-12-11T00:02:49Z")
I suppose you could see it that way. When the 7.65% of your check is deducted, my experience has been that people refer to that as social security. That would be inclusive of OASDI and Medicare. But they are distinct, you are correct. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [December 11, 2013, 12:28am UTC](https://boards.straightdope.com/t/social-security-tax/675937/24 "2013-12-11T00:28:19Z")
> [@barbitu8](#): > > Social Security is not insurance. It is a tax. Or so SCOTUS held some time ago, but I do not have the cite. If it were insurance, it would be unconstitutional. I know it is referred to as OASDI by the federal government too, but the government has no power to engage in insurance. The government can tax but cannot insure. It is funded by a tax but it is social insurance - and is so described in a section of the [Historical Background And Development Of Social Security](http://www.ssa.gov/history/briefhistory3.html) on their website. Which says: > [@SSA.gov/History](#): > > The Social Security program that would eventually be adopted in late 1935 relied for its core principles on the concept of “social insurance.” Social insurance was a respectable and serious intellectual tradition that began in Europe in the 19th century and was an expression of a European social welfare tradition. It was first adopted in Germany in 1889 at the urging of the famous Chancellor, Otto von Bismarck. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 11, 2013, 2:01am UTC](https://boards.straightdope.com/t/social-security-tax/675937/25 "2013-12-11T02:01:38Z")
> [@Chronos](#): > > Nobody ever gets “the same money back” from a loan. Well, of course, in a literal sense. But my comment was with regard to the suggestion that SS is a “mandatory loan.” If you loan someone money, there is a contract that states that they are obligated to pay you back a specific amount agreed in advance. Barring default, you get the same (amount of) money back plus interest. SS is not like a loan, more like an annuity. ---
**Author:** ![md2000](https://avatars.discourse-cdn.com/v4/letter/m/73ab20/32.png) [@md2000](https://boards.straightdope.com/u/md2000)\ **Post date:** [December 11, 2013, 6:41pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/26 "2013-12-11T18:41:59Z")
If you pay a tax generally on all income, regardless of source - it is an income tax. If you pay only on wages paid/earned, it is a payroll tax. So, not being a US taxpayer, I have to ask - do you pay SS on capital gains, interest income, gifts, farm income, etc.? I.e. non-wage income, although I suppose self-employed or contract work could be defined as a form of wage. Short guide to economic systems: _ **Communism** - the farmer owns two cows - the state takes the cows, gives the farmer milk. **Socialism** - the farmer keeps his cows, but the government takes the milk. **Capitalism** - the farmer sells one cow and buys a bull._ ---
**Author:** ![thelurkinghorror](https://avatars.discourse-cdn.com/v4/letter/t/7c8e57/32.png) [@thelurkinghorror](https://boards.straightdope.com/u/thelurkinghorror)\ **Post date:** [December 11, 2013, 7:06pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/27 "2013-12-11T19:06:54Z")
> [@md2000](#): > > So, not being a US taxpayer, I have to ask - do you pay SS on capital gains, interest income, gifts, farm income, etc.? I.e. non-wage income, although I suppose self-employed or contract work could be defined as a form of wage. Respectively: Capital Gains - no, but tax is treated differently (lower) if you hold it for longer, and certain years the percentage tax is less than your percentage on normal income bracket, Interest - no, regular income tax. Cap Gains & Interest both have non-taxed versions. Gifts - no, always $0 tax if you’re the recipient, giver is taxed if over a certain amount. Farm - yes, if the farm is your business and you’re not an employee Self-employed - yes, similar to farm, you pay both halves of FICA 15.3% with that but get a deduction). Contract work is an iffy situation, but is usually treated the same as self employment. Shadier employers don’t tell their employees this until they find out in January. ---
**Author:** ![Really\_Not\_All\_That\_Bright](https://avatars.discourse-cdn.com/v4/letter/r/e8c25b/32.png) [@Really\_Not\_All\_That\_Bright](https://boards.straightdope.com/u/Really_Not_All_That_Bright)\ **Post date:** [December 11, 2013, 7:09pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/28 "2013-12-11T19:09:43Z")
> [@barbitu8](#): > > Social Security is not insurance. It is a tax. Or so SCOTUS held some time ago, but I do not have the cite. If it were insurance, it would be unconstitutional. I know it is referred to as OASDI by the federal government too, but the government has no power to engage in insurance. The government can tax but cannot insure. Charles C. Steward Mach. Co. v. Davis, 301 U.S. 548, 584 (1937). ---
**Author:** ![Iggy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iggy/32/3364_2.png) [@Iggy](https://boards.straightdope.com/u/Iggy)\ **Post date:** [December 11, 2013, 7:14pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/29 "2013-12-11T19:14:37Z")
> [@barbitu8](#): > > Social Security is not insurance. It is a tax. Or so SCOTUS held some time ago, but I do not have the cite. If it were insurance, it would be unconstitutional. I know it is referred to as OASDI by the federal government too, but the government has no power to engage in insurance. The government can tax but cannot insure. The key case was [Helvering v Davis](http://en.wikipedia.org/wiki/Helvering_v._Davis) in which the court upheld Social Security under the general welfare clause and the Congressional taxing authority. > [@SCOTUS in Helvering v Davis](#): > > The proceeds of both taxes _(employer and employee portions)_ are to be paid into the Treasury like internal-revenue taxes generally, and are not earmarked in any way. _Italicized_ note is mine and not in the [text of the original judgement](http://www.ssa.gov/history/supreme1.html) of the court. ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [December 11, 2013, 9:55pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/30 "2013-12-11T21:55:46Z")
This was a non-trivial question for my father. He worked for the UN, since nearly the beginning. The UN had a policy of reimbursing taxes paid to the host country (the US for him) by employees. They did not consider Social Security a tax. Plus, since the UN was not on US soil officially, they did not have to pay the employer’s share, and he had to pay as if self-employed. He fought a long, drawn out battle about this, and finally got a ruling that SS was indeed a tax, I suppose for the reasons listed here. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [December 11, 2013, 10:24pm UTC](https://boards.straightdope.com/t/social-security-tax/675937/31 "2013-12-11T22:24:59Z")
> [@Voyager](#): > > This was a non-trivial question for my father. He worked for the UN, since nearly the beginning. The UN had a policy of reimbursing taxes paid to the host country (the US for him) by employees. They did not consider Social Security a tax. Plus, since the UN was not on US soil officially, they did not have to pay the employer’s share, and he had to pay as if self-employed. > He fought a long, drawn out battle about this, and finally got a ruling that SS was indeed a tax, I suppose for the reasons listed here. With that ruling, did he get the UN to refund the taxes paid or did he ever file for Social Security? ---
**Author:** ![Voyager](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/voyager/32/133_2.png) [@Voyager](https://boards.straightdope.com/u/Voyager)\ **Post date:** [December 12, 2013, 12:11am UTC](https://boards.straightdope.com/t/social-security-tax/675937/32 "2013-12-12T00:11:28Z")
> [@jasg](#): > > With that ruling, did he get the UN to refund the taxes paid or did he ever file for Social Security? He was paying Social Security all the time - but at self-employed rates. I don’t remember any windfalls so I don’t think he got the money back, but they did pay it going forward. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 12, 2013, 1:26am UTC](https://boards.straightdope.com/t/social-security-tax/675937/33 "2013-12-12T01:26:54Z")
> [@md2000](#): > > …do you pay SS on capital gains, interest income, gifts, farm income, etc.? I.e. non-wage income, although I suppose self-employed or contract work could be defined as a form of wage. No. SS is paid only on wages reported on a W-2 form by your employer if you are employed, or on your net earnings from self-employment on a 1040ES form. ---
**Author:** ![UDS](https://avatars.discourse-cdn.com/v4/letter/u/ecae2f/32.png) [@UDS](https://boards.straightdope.com/u/UDS)\ **Post date:** [December 12, 2013, 2:41am UTC](https://boards.straightdope.com/t/social-security-tax/675937/34 "2013-12-12T02:41:58Z")
> [@CookingWithGas](#): > > No. SS is paid only on wages reported on a W-2 form by your employer if you are employed, or on your net earnings from self-employment on a 1040ES form. OK, if it’s charged on earning from self-employment, then it’s not strictly speaking a “payroll tax”, which is charged only on pay to employees. It would probably be classified as an “earned income tax”, i.e. a tax on earned income, rather than on all income. ---
**Author:** ![CookingWithGas](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/cookingwithgas/32/485_2.png) [@CookingWithGas](https://boards.straightdope.com/u/CookingWithGas)\ **Post date:** [December 12, 2013, 3:13am UTC](https://boards.straightdope.com/t/social-security-tax/675937/35 "2013-12-12T03:13:56Z")
> [@UDS](#): > > OK, if it’s charged on earning from self-employment, then it’s not strictly speaking a “payroll tax”, which is charged only on pay to employees. > > It would probably be classified as an “earned income tax”, i.e. a tax on earned income, rather than on all income. I suppose we can debate forever what “payroll tax” \*should \*mean but the convention in the U.S. is that “payroll tax” means Social Security and Medicare tax, plus payroll taxes that only the employer pays, like unemployment and worker’s compensation. ---
**Author:** ![UDS](https://avatars.discourse-cdn.com/v4/letter/u/ecae2f/32.png) [@UDS](https://boards.straightdope.com/u/UDS)\ **Post date:** [December 12, 2013, 3:37am UTC](https://boards.straightdope.com/t/social-security-tax/675937/36 "2013-12-12T03:37:39Z")
> [@CookingWithGas](#): > > I suppose we can debate forever what “payroll tax” \*should \*mean but the convention in the U.S. is that “payroll tax” means Social Security and Medicare tax, plus payroll taxes that only the employer pays, like unemployment and worker’s compensation. I accept, of course, what you say about conventional usage in the US. But does that not make the question in OP fairly pointless? If “payroll tax” means social security and certain other things, then obviously social security is a payroll tax. I think if the question is understood as “is social security _correctly consdiered_ a payroll tax or an income tax?” it becomes more meaningful and more interesting, and most of the responses in this thread seem to me to have understood the question in those terms. ---
**Author:** ![Cerealbox](https://avatars.discourse-cdn.com/v4/letter/c/7ab992/32.png) [@Cerealbox](https://boards.straightdope.com/u/Cerealbox)\ **Post date:** [December 12, 2013, 5:13am UTC](https://boards.straightdope.com/t/social-security-tax/675937/37 "2013-12-12T05:13:57Z")
> [@Ethilrist](#): > > Mandatory loan? Since you get it back, it’s not really a tax… Social security isn’t some sort of mandatory savings account. It it’s a transfer payment. It’s a common misconception that social security is a program you “pay into.” It’s just you give money to the government and the government gives it to other people for you. That’s it. That’s social security. ---
**Author:** ![UDS](https://avatars.discourse-cdn.com/v4/letter/u/ecae2f/32.png) [@UDS](https://boards.straightdope.com/u/UDS)\ **Post date:** [December 12, 2013, 6:33am UTC](https://boards.straightdope.com/t/social-security-tax/675937/38 "2013-12-12T06:33:24Z")
> [@Cerealbox](#): > > Social security isn’t some sort of mandatory savings account. It it’s a transfer payment. It’s a common misconception that social security is a program you “pay into.” It’s just you give money to the government and the government gives it to other people for you. That’s it. That’s social security. It’s slightly more than that, since having paid social security entitles you, when your time comes, to claim benefits which in turn will be funded by social security paid by _others_. In other words, it works like insurance. Your household fire insurance doesn’t go into a fund either; it goes to people whose houses get burned down. And, when your house is burned down, you’ll get a payment funded by other people’s fire insurance premiums. The difference, I suppose, is that fire insurance transfers money from people whose houses don’t burn down to people whose houses do burn down, while social security transfers money from people who work to people who don’t work. And since most of us will have times in our lives when we don’t work and time when we do, at different times we are likely to find ourselves on different ends of the stream of transfer payments. Whereas with fire insurance we devoutly hope only ever to be at one end of the stream of payments. [Previous page](https://boards.straightdope.com/t/social-security-tax/675937.md?page=1)