THE TAX ATTIC with Jerry Coon

History of Social Security

Jerry Coon

Three weeks ago, my youngest daughter, Kimberly, received her master’s degree from the Department of Writing, Rhetoric and Discourse from Chicago’s DePaul University. At the department’s awards banquet, Dr. Deborah Brandt, professor emerita of English at the University of Wisconsin-Madison, gave the keynote speech, titled “Taking Writing Seriously.” DePaul couldn’t have picked a more appropriate speaker or topic for a group of writing, rhetoric and discourse journalism students who take writing very seriously.

The gist of her speech was that writing has traditionally taken a back seat to reading in the public’s battle to obtain literacy. Dr. Brandt espoused the theory that while teaching students to read can open the student’s world to reading other people’s written words, teaching students to write can tap into the student’s inner world. I’m paraphrasing here since I was sitting in an auditorium without the ability to take notes, but she basically asked a question in the terms of “Is it more valuable to be able to read what others think or is it more valuable to be able to write what others may read?”

That’s a darned good question. Are we putting too much emphasis on reading and not enough emphasis on writing? I have read that some schools with the advent of computers are no longer teaching penmanship. Will this then de-emphasize writing even more? I believe that literacy is important and my definition of literacy is being able to read and to write. Throughout history, being able to wield the influence of the written word has proven to be almost as valuable as wielding a sword. Of course, it’s only valuable if the people you are trying to influence can read and understand what you are writing. Perhaps this is one of those chicken and egg things. Neither is less or more valuable than the other; a literate person can do both. Dr. Brandt would agree with that, I am quite sure.

This is third article on the Social Security Administration (SSA). Let’s talk about some SSA history this week.

Prior to the implementation of the Social Security Act on January 1, 1937, there were no federal programs to help the elderly. The nation was still in the throes of the Great Depression, so there were work programs that helped those who could work. However, those who couldn’t work were just out of luck. For the most part, they depended upon family and if they didn’t have any family, they were really in a very tough position. Back then, there were county poor farms for the elderly and they were full for a reason.

It was a different world back then and, frankly, I have a tough time imagining what it must have been like growing old without any of the fiscal programs, such as Social Security, Medicare, unemployment, 401k’s, IRAs, and pensions, that we have available today.

Of course, in 1937, a person’s life expectancy was 62.9 years and there was no early drawing of benefits at age 62. Only those who survived to age 65 could draw. It wasn’t until 1961 that taxpayers were allowed to make the election to start receiving benefits at age 62. I doubt if even President Roosevelt had the vision to imagine how big a program Social Security has become. It started out quite small by covering only workers with W-2s. It was supposed to be a forced savings type of program. Money was paid in and accumulated with interest in an account with the SSA. If that person was fortunate to live to age 65, he would receive an annuity for as long as he lived based on the principal and interest he accumulated. There was no cost of living adjustment (COLA) in the original program. You got a fixed amount from age 65 until you died. It wasn’t until 1975 that Congress instituted COLAs.

Right or wrong, that change in 1975 was a game-changer for SSA recipients. Given the fact that life expectancy had increased to 72 years by then, recipients were almost guaranteed to receive much more than they paid in during their working years.

Self-employed people were brought into the system in 1951. There was no disability component to the original law. That was a controversial addition that occurred in 1956, but it applied at the time only to workers who died after reaching the age of 50.

In 1960, disability was expanded to cover all qualifying taxpayers regardless of age.

Today, approximately 6.4 million taxpayers receive survivor benefits. This number includes 1.9 million children who receive a monthly benefit until they graduate from high school or obtain a disqualifying age.

There was no Medicare coverage until 1965. Today, substantially all taxpayers are covered by Medicare.

In 1983, for the first time, up to 50% of benefits received became taxable. In 1993, the amounts taxable were subsequently increased to a maximum of 85%. As Commissioner of the Social Security Administration Michael J. Astrue stated, Congress could increase that percentage to 100% at any time.

A significant 1983 change increased the full retirement age to 67. Depending upon the retiree’s age, full retirement age could be anywhere between age 65 and age 67.

In 1996, Congress directed all SSA beneficiaries to being using direct deposit of benefits. For those signing up now, there is no alternative to the direct deposit method. Incredibly enough, due to printing and processing cost reductions, SSA saves approximately 10 million dollars per month.

All of these changes over time have either increased the solvency of the SSA system or decreased the solvency. All of the early changes decreased the solvency and most of the later changes have attempted to increase the time at which the SSA will run out of money. Without further changes, that significant date that reserves will be extinguished will be sometime in 2033. In a future article I will look at the solutions that could extend the 2033 deadline date. This is Jerry Coon signing off.


Jerry Coon is an Enrolled Agent. He owns Action Tax Service on Northland Drive in Rockford. Contact Jerry at

About Squire News 6222 Articles
The Squire has been Rockford’s free weekly newspaper since 1871. Our loyal readership includes over fifteen thousand homes in the Rockford area, including the affluent Lakes area of Lake Bella Vista, Bostwick Lake and Silver Lake; Belmont, Blythefield, as well as Algoma, Courtland, Cannon and Plainfield Townships. The Squire is distributed through the U.S. Post Office every Thursday. We also deliver to in-town businesses and homes with paper carriers and news stands in our grocery stores and over thirty local shops.