No, I didn’t watch his special on immigration tonight, seen locally on KSDK-NBC-5 at 7 PM, at least not on purpose. I landed on it by channel-surfing accident. I landed on 5 at the moment when Brokaw mentioned a study that illegal aliens have paid $50 billion in Social Security taxes as a result of their working in otherwise legitimate employment situations. After a few more liberal platitudes, I started channel surfing again.
Here’s the flaw in that statement and that study.
Let’s assume for the sake of discussion that the study is literally correct. And, in my opinion, it’s more likely so than not that the $50 billion figure is the truth.
That $50 billion paid into the Social Security system is offset and then some by illegal aliens’ use of Social Security benefits (and would be even further if proposals to expand the benefit base S.S. to include many more illegal aliens becomes law). This isn’t counting the social welfare benefits through programs other than Social Security that illegal aliens receive, moneys that could be used to fortify the financial situation for Social Security and Medicare, in theory.
Let’s again assume for the sake of discussion that illegal aliens were not receiving Social Security or other social welfare benefits, not a dime. Let’s assume that the $50 billion they paid in aggregate into S.S. over the number of years that study analyzed is their only interaction with the S.S. system.
With that having been assumed, the S.S. system is still losing out. Here’s where you need an accountant.
There is only one revenue source for the S.S. system (and by saying S.S., I mean Social Security and Medicare, both.) Those are payroll taxes on employees and payroll taxes for employers on behalf of their employees.
Currently, the income tax rate for regular Social Security (FICA/OASDI, i.e. Federal Insurance Contributions Act for Old Age, Survivors and Disability Insurance) is 6.2%, on both employers and employees. As an example, a $40,000 gross salary employee would pay $2,480 in FICA/OASDI income taxes, and the employer would pay the same amount in FICA/OASDI payroll taxes, in that salary year.
However, there is a “ceiling” for FICA/OASDI. For 2007, the ceiling will be $97,500, in contrast to $94,200 ceiling for 2006. So any dollar earned by an employee over the first 94,200 in 2006 was not subject to FICA/OASDI taxes on either employer’s or employee’s sides. Therefore, multiplying 94.2G by 6.2%, the maximum amount in FICA/OASDI payroll taxes that an employee could possibly have paid in 2006 was $5,840.40, same on the employer’s side, for a maximum of $11,680.80 from both ends.
There is also a FICA/Medicare income and payroll tax. It is 1.45% for both ends. Up until 1993, it was also subject to an income ceiling, but the Clinton “Budget Deal” passed that year eliminated the ceiling, meaning all income is subject to the 1.45% plus 1.45% FICA/Medicare tax. Which means there’s no theoretical maximum FICA/Medicare tax that one could pay. A person with a $1 million income would pay 1.45% ($14,500) on the whole income, and the person’s employer would pay the same in payroll taxes on the whole income, not just the first such-and-such amount.
If you are self-employed, you are liable for both employer and employee ends of both FICA/OASDI and FICA/Medicare, meaning 6.2 plus 6.2 plus 1.45 plus 1.45, or 15.3 percent of what you pay yourself.
And also don’t forget that FICA taxes don’t have “low income wiggle room” like regular Federal income taxes have. There is no such animal as “your first few thousand in income is exempt” allowance in the FICA zoo.
Illegal aliens may have paid $50 billion in S.S. taxes (i.e. their own FICA/OASDI, FICA/Medicare, and their employer’s payroll taxes for FICA/OASDI and FICA/Medicare) during the indeterminate time period. However, one truth of life is that illegal aliens are working for lower wages than the native population would accept. This is why Our Betters want mass immigration, to lower the wage scale.
If the illegal aliens were never here, the same legit jobs they did would have been done by native Americans and legal aliens, (or the work would have been accomplished by other, perhaps more technologically advanced and capital-producing and higher value-added means), who/which would have had higher average salaries and wages, and whom/which therefore in the aggregate would have had a higher collective payroll base. Therefore, more FICA taxes would have been collected on that income base, meaning that there would have been MORE than $50 billion in S.S./FICA taxes collected from that work being accomplished.
My educated guess is that anywhere between two-thirds and one whole time again more FICA taxes would have been collected in this scenario, meaning that the S.S. was underfunded by an amount between $33 billion and $50 billion. This educated guess is based on another educated guess that, ceteris paribus, illegal aliens will work for anywhere between one-half and two-thirds of what a native American would demand and receive for the same work.
In other words, that $50 billion that illegal aliens paid into the S.S. system would have been $83-100b paid into the S.S. system by native Americans accomplishing the same workload in the same time frame either by the same means or by other means, if not for the downward pressure their presence created on the wage scale.
Here in the real world with the illegal aliens, the marginal increase in personal incomes (and by deduction, FICA taxes) that isn’t there due to the cheap labor, is not earned by anyone, which translates into higher corporate and business profits. While those profits are subject to income taxation of some sort, they are not subject to S.S./FICA taxes of any sort. And once money gets into the corporate profit realm, then tax laywers and accountants can Enron around and shield as much of it as possible from the eyes of the tax collector.
It could very well be the case that, extrapolating this effect for the financial and fiscal scenario between 1965, the beginning of mass illegal and legal non-white immigration, and the point in the future when S.S. expenditures are expected to surpass S.S. revenues, that the increased revenues not realized due to illegal aliens’ presence meaning a lower wage base could have sustained S.S. through the coming “baby boom crisis” of the fiscal situation in S.S. And don’t forget, this analysis leaves out illegal aliens’ use of S.S. system benefits.
Also this analysis ignores the sociopolitical situation (i.e. racial dispossession) that will be created by mass Hispanic immigration and presence in the coming decades, a factor that beancounters usually can’t discern. In the middle of this century, a U.S. Federal Government that supervises a majority Hispanic population will likely cut off old gringos from Social Security and Medicare, to fund social welfare programs aimed at a younger, Hispanic population.
So the next time you hear some liberal or neocon talking head blabbering about how we need mass immigration to solve the “Baby Boom Crisis” in Social Security, they’re full of it, both in financial terms and in sociopolitical terms.
Countenance Blog 