Add-ons ??

Puh-lease.
An add-on is just another tax. Why should I have to dedicate more of my income to securing my future ?
I already skip Roth IRAs because I don't believe that Congress really will keep their mitts off of my theoretically tax-free earnings until I turn 59...

No private accounts = No win.

It's not whether you want to add-on but whether we demand that you do. The safety net isn't about freedom.

Michael: The point is that, once private accounts exist, demography will ensure that it's only a matter of time until there is a set-off against social security because of all the money in the private accounts. Once there's a set-off, it will necessarily grow congress by congress until social security is basically a privatized savings plan with a state welfare component, which is where we want to get.

The Democrats are absolutely right that any private accounts mean the end of social security.

oj:

You may demand all you like, but actually getting me to pay might be difficult.
You'll have to do more than raise current FICA taxes, since many people like myself simply game those.

David Cohen:

I'm not sure that I get your point.
If it's that private add-on accounts will inevitably lead to private SS accounts, I disagree.
We ALREADY have private add-on accounts: IRAs, 401(k)s, 403(b)s, etc...

They haven't yet gotten us privatized SS accounts.

Michael:

What proportion of your taxes do you not pay today?

oj:

An interesting question, and one not able to be definitively settled in the absence of an IRS audit.

Being self-employed, I take great pains to ensure that the vast majority of my income appears to be unearned income, and thereby avoid paying employment taxes.

I have not knowingly engaged in fraud, just prudent tax planning, so my answer would be "none", i.e., I pay all that I am supposed to.

A similar person who reported all of their income as earned would pay about 10% more of their gross income in employment taxes, and the IRS might like that answer more.
A person who was not self-employed, and who had a similar income, would pay about 6% more of their gross in payroll taxes.

So you'll start committing tax fraud now?

ANY change in Social Security will be the first trickle of water from the face of the dam. (Any change other that just increasing the tax, that is.) It will set in place an inexorable series of events that will massively change the entire structure of SS.

Michael: And the existence of those non-ssi accounts is part of what is pushing reform. People are less than happy about seeing a large percentage of their wages being locked up in a plan that has, more or less, no return when they can plainly see the advantages of investing tax advantaged retirement funds.

Also, social security was designed for a time when almost no one had retirement savings. No lots of people do. So, the necessity for income transfers from the young to the old make much less sense. A lot of social security involves transfers from the less wealthy to the more wealthy. That can't be a long-term equilibrium solution. Along with the falling ratio of workers to retirees, that explains a lot of the push for means-testing. Means-testing necessarily means that the more you successfully save and invest for retirement, the less you get from social security. But, as you note, people have a lot of scope for tax-planning to minimize their tax burden. Are people really going to show income from private retirement accounts if they not only have to pay income tax but lose, dollar for dollar let's say, social security income? They'll be paying, roughly, a 125% marginal rate. So, that's not an equilibrium solution either.

There may be other ways out, but the obvious one is to divert FICA money (even if the entire FICA rate goes up) into mandatory investable accounts that must be redeemed starting at a certain age at at least a certain rate and which count towards your social security income. If future returns are anything close to historic returns, and the government doesn't screw it up too badly, pretty soon all of our governmental retirement income will be coming from the private accounts, except for the poorest. At that point, the welfare program will have been calved off from the savings component, albeit not as transparently or easily as it would have been were we willing to be rational about social security.

But, to get back to the point, you're right. We are in the middle of a program of killing off social security that became inevitable when the government started pushing tax-preferred retirement savings plans.

Hmmm, that seems even less coherent than my usual screed. Let me know what remains unclear.

SS is toast in the long run