The Truth about Social Security

                        Volume 1, No. 8

                               by

                        Richard McDonald



     The purpose of this Newsletter is to inform you of the truth
of the Social Security System.

     First,  before I begin to explain,  I must  define the terms
"employee" and  "employer".   The correct  legal  definitions  of
these terms  are:  "Employee" =  working for  the government, and
"Employer" =  government  or government protected workplace.  The
W-4 form  is a  Class 5 gift tax form;  by signing this form, you
are stating  that you  are receiving  the gift of employment from
the government,  so everything you receive is profit or gain as a
U.S. citizen.

       In  the history  of the United States of America, there is
probably no  more dramatic demonstration of deliberately designed
misinformation than the literature put out by the Social Security
Administration.   One need go no further than three (3) decisions
handed down  by the  U.S. Supreme  Court (two in 1937  and one in
1960) to  realize  what  blatant  deception  the  current  Social
Security literature  contains.   These cases are: Steward Machine
v. Davis, 301 U.S. 548 (1937);  Helvering v. Davis,  301 U.S. 619
(1937); and Flemming v. Nestor, 363 U.S. 603 (1960).  These cases
clearly enunciate the position of the Supreme Court on the Social
Security Act and the actual legal position of those who expect to
receive benefits  from it.   Highlights  of these  cases  are  as
follows:

       1. The payroll deductions of workers do NOT go into a pool
or trust fund, but:

     "The proceeds  of both (the employee and the employer) taxes
     are to be paid into the treasury like other internal revenue
     generally, and are NOT earmarked in any way."

                       [Helvering v. Davis, U.S. 619, 635 (1937)]


      2. The Court points out that payroll deductions of American
workers are  NOT payments  on premiums for insurance of any kind,
but are simply income taxes:

     "... eligibility  for benefits  ... (does)  not in  any true
     sense depend on contribution through the payment of taxes."

                    [Flemming v. Davis, 363 U.S. 603, 609 (1960)]


     3. Furthermore, payments made by employers for each of their
employees are  NOT matching  to be credited to the account of the
employee, but constitute an EXCISE TAX on the employer's right to
do  business.   Consequently,  his so-called  "contributions"  go
directly into the general fund of the treasury.


    4. People participating in Social Security payroll deductions
do NOT  acquire property  rights or  contractual  rights  through
their payments, as they would if they were paying on an insurance
policy or contributing to an annuity plan.  Simply put, there are
no guarantees!   The Congress does have power to deny benefits to
citizens even, though they had paid S.S. taxes. Also, the amounts
of benefits  granted are  at the option of Congress.  Flemming v.
Nestor, 363 U.S. 603, 610 (1960).


      5. Benefits granted under Social Security are therefore NOT
considered earned by the worker, but simply constitute a gratuity
or gesture of charity.  As the Court states:

     "Congress included  in  the  original  Act,  and  has  since
     retained a  claim expressly  reserving to it  the  right  to
     alter, amend, or repeal any provision of the Act".

                [Flemming v. Nestor, 363 U.S. 603, 610-11 (1960)]


      In effect, Social Security benefits are not unlike pensions
to be given or withheld at the discretion of Congress.


     6. Payroll deductions which a worker pays (a special kind of
"employment/income tax")  do nothing  more than  qualify him  for
consideration as  a recipient of a charitable gift.  His payments
do not  guarantee him anything.  They do not guarantee the amount
to be  received, nor  the duration of the gift.  The Congress can
alter or abolish the entire process at any time.

     Justice Hugo L. Black, dissenting in the Nestor case, stated
that the  whole Social  Security  thesis,  as  expounded  by  the
majority of  the Court,  is that  the government  is  giving  the
participating citizen  "something for  nothing and  Congress  can
stop doing so when it pleases."  He further stated:

     "I cannot  believe that  any private  insurance  in  America
     would be  permitted to repudiate its matured contracts  with
     its policy-holders  who have regularly paid all the premiums
     in reliance upon the good faith of the company."

                                      [Flemming v. Nestor, supra]
                                       [Justice Black dissenting]

     It was  only a  short  time  after  the  Supreme  Court  had
revealed that Social Security funds are:

     "... paid into the  Treasury  like  other  internal  revenue
     generally, and are NOT earmarked in any way ..."


and  that the Social  Security Administration  went  right  ahead
publishing  literature   fraudulently  proclaiming  that  payroll
deductions:

     "... are strictly  accounted for and kept separate from  the
     general funds of the U.S. Treasury."

                                         [Quoted by Warren Shore]
                     [Social Security:  The Fraud in Your Future]
                     [The MacMillan Co., New York, 1975, Page 23]


     Literature  from   the  Social  Security  headquarters  also
continued  to   talk  about   its  "insurance   plan,"  and   the
"contributions" which  are "pooled"  in a  "trust fund."   All of
this was  deliberately misleading  in view  of the  Supreme Court
decisions cited  above.   Had  a  private  insurance  company  so
grossly misrepresented  its position  in this  same  manner,  its
officers probably would have been sent to jail.

     Ever since 1935, the Social Security Administration has laid
such great emphasis on its "trust fund", that the average citizen
believes that  his benefits  are paid  out of  this "fund".   The
Administration knows this is NOT true since benefits are paid out
of the  general treasury.   It  therefore refers to its so-called
trust fund  as a  "reserve of  assets"  to  back  up  the  Social
Security program.

     What  this   "reserve  fund"   amounts  to   is  simply   an
accumulation of  United  States  Bonds  which  wouldn't  pay  the
liabilities of  the system  even if  they were  to be  cashed  in
tomorrow.   Furthermore, a government Bond is nothing more than a
claim against  the American  people for  taxes not yet collected.
This is also true of the interest which must be paid on the bond.
Neither the  bond, nor the interest to be paid on it, constitutes
an "asset" in any real sense of the term.

       For  a government  agency  to  accumulate  a  quantity  of
government-owned bonds  and call  these a "reserve" of assets, is
like a man writing himself a bundle of I.O.U.s  and listing these
as "assets" on his  financial statement to the bank.  People tend
to think  of a  "trust fund"  as more  or less liquid funds which
have an available cash flow if needed. The Social Security system
has no such funds.

     Unfortunately for some, and tragically for others, the words
of Warren Shore describe the real situation:

     "Obviously, there  is no  pool, just  as there  are no trust
     funds.  Both words remain in the Social Security Lexicon not
     because they  are true, but because they help to foster  the
     public notion  that Social  Security is  like insurance with
     its premium  pools and  trust funds regulated to support the
     promise made."
                                                 [ibid., page 22]


       Because ALL funds collected in the name of Social Security
are never earmarked for  any special  use,  they are intermingled
with and  spent each  year like any other funds.  This means that
billions  of   dollars   collected   by   the   Social   Security
Administration in  the early days of the program were used during
1935 to  1945  to  help  finance  the  military  requirements  of
national defense  incidental to  World War  II.   Since the  war,
funds collected  in the name Social Security have continued to be
spent on  all the  miscellaneous appropriations of the government
including foreign aid,  salaries  for nearly  three  (3)  MILLION
federal employees, and various regulatory agencies of government.

       In recent years there has been considerable talk about the
Social Security  system becoming "insolvent" and getting close to
"bankruptcy."  The government itself is largely to blame for this
misconception because  it has  used  this  line  to  justify  the
gigantic  leap  in  Social  Security  taxes.    They  said  these
increases were  absolutely necessary  to keep the system "sound."
At the  same time,  the Social  Security Administration  has been
promising tremendous  increases in "benefits" if the people would
tolerate this  new wave  of increased taxes.   In  reality,  what
Congress really accomplished was to create more resources for the
general fund of the treasury for political giveaway programs. The
scare tactic  of a  "bankrupt" Social  Security system  has  been
immorally used  against aging Americans to minimize resistance to
the new tax gouging in the name of Social Security.

       The  main thing  to keep  in mind  is that Social Security
cannot go bankrupt, in the ordinary sense of the term, because it
is able  to depend  upon the government power to raise revenue by
compulsory means  through taxes  rather than a trust fund such as
insurance companies  are required to have.  As long as the people
will allow  Congress to  "tax and tax, spend and spend, elect and
elect, the  people are too damn dumb to understand" (according to
the political  formula of  Harry  L.  Hopkins  as  administrative
assistant  to   Franklin  D.  Roosevelt),  Social  Security  will
continue to be a runaway spending program.

       The Social Security board of trustees emphasized the power
to tax as a secret weapon in 1972 report to Congress by stating:

     "Because compulsory  social security insurance is assured of
     continuing income  ... it does not have to build up the kind
     of  reserves   that  are   necessary  at  all  times  in  an
     institution that  cannot count  on current  income  to  meet
     obligations."


      The Taxpayers Federation immediately issued a press release
stating:

     "It is now publicly acknowledged that all adherence to sound
     insurance  practices   have  been   abandoned.  This  single
     decision assured  ever-mounting tax  bills  for  the  system
     without any possibility of  relief.  It is the ever-mounting
     tax bills which constitute the greatest threat to the Social
     Security system, and by 1980 that threat had become terribly
     real."


Fifty-eight years  ago the  Federal Government created the Social
Security Program.   In  1935 it  was a new government program for
American citizens.  It did not then, and does not now include all
citizens.   Some  groups,   such  as  railroad  workers,  certain
professionals such  as doctors  and lawyers,  and also government
employees (including  members of Congress) are not members of the
plan.   Until just  recently, certain  religious groups also were
not members of the program.

     The government program for U.S. citizens' Social Security is
literally called  the Federal Insurance Contributions Act, and is
frequently abbreviated  as FICA.   As  with some other government
program names,  the actual  name is  not totally  correct  and is
somewhat misleading.   The  FICA program is not an insurance plan
in the  commonly accepted  fashion, because there is no guarantee
that the  citizen will  receive  certain  benefits.    A  private
insurance policy  must have  protected and  positive benefits for
its members.   The  word "insurance"  in "FICA"  is not a correct
description, as  Congress has  total control  over the  amount as
well as the duration of all benefits. Collections or payments can
be changed at the whim of Congress, which has been done from time
to time.

     The  third   word  in  the  name,  "contributions"  is  also
deceptive and  misleading.  In the various FICA publications, the
word "donation"  is commonly  used as  a substitute  for the term
"contributions".   Most dictionaries  define these  words to mean
that something is voluntary, optional, and is NOT mandatory.  The
simple fact is that the FICA program is voluntary and optional.

     No law has been passed requiring any State Citizen to enroll
in, and/or subscribe to,  the FICA program.  Remember, classes of
workers,  such  as government and railroad employees,  are exempt
from joining.   There  is strong  influence and  coercion to make
everyone enroll  in the FICA program, but there is no requirement
that it  must be done.  Joining the program is voluntary, and the
right not  to enroll  is  protected  by  the  U.S.  Constitution.
Described another  way, a  FICA number  CANNOT be forced upon any
State Citizen,  but must  be requested  by you.   Usually, a FICA
number is  requested and  received  when  the  State  Citizen  is
legally a  minor.  There is a question of validity of such action
as minors are not allowed to participate in contract,  especially
one that has a lifetime application.

       Other  groups OFFICIALLY  exempt from the FICA program are
non-profit organizations  and also  hospital employees.  Farmers,
commercial fishing  boats, international agencies like  the U.N.,
workers at  tax-supported universities,  schools, and  workers at
any tax-exempt entity  generally  do  not  have  to  participate.
Preachers, pastors, priests, rabbis,  and monks  do not  pay FICA
taxes if they choose NOT to.

       To withdraw from FICA as a group, notice of intent must be
presented  to  the  IRS  two  years  in  advance  of  the  actual
withdrawal action  by the  group.   As a reflection of the fading
confidence in the FICA, there is a growing increase of notices to
withdraw,  such  as the  State of  Alaska  (which  was  refused).
Besides the obvious unreliability of the FICA program, the recent
increase in  contribution rates is another reason for citizens to
consider ending participation.

      In many cases workers have more withheld for FICA  than for
"income tax".   Currently, the so-called average worker works for
more than  one-third  of the  year for  the government,  based on
these  two  deductions alone.  Originally, a FICA membership card
carried a warning that the card was to be used only by the Social
Security Administration, and not to be used as  "identification".
Since then,  the warning  caution has  been removed from the card
and the  number has become a common identification for items such
as bank accounts, drivers licenses, etc.

     The Social Security program has various examples of a double
standard.  One such example is that amounts will be withheld from
a worker even if he does not have an FICA number, but there is no
such requirement  to withhold from a State Citizen.  The law does
not require  a State  Citizen to  have  an  account  number,  but
collects a contribution from compensation unless the worker is in
some class  (status) that is OFFICIALLY exempt.  One method to be
exempt from payment to  the FICA  by withholding is to work under
contract which  specifies that  all compensation must be received 
and there are no deductions for any purpose.

       The State Citizen's right to contract is protected by your
State Constitution  and  in the  U.S. Constitution at Article  I,
Section 10.  Such a financial contract agreement is beneficial to
both worker and workplace.  The workplace has reduced bookkeeping
costs, and  does not  pay "matching"  amounts toward  FICA.   The
company having  reduced business  expense by  avoiding FICA costs
could invest such amounts,  experience an increase in profits, or
share the  amount with  worker, etc.  Such working agreements are
within the State Citizen's rights which were established over 200
years ago.   A  State Citizen  cannot be  subjected to government
programs that infringe upon rights, such as FICA.

      The collection of FICA tax is accomplished by the IRS.  The
"code book" for  the IRS  is Title  26 of the United States Code.
This code  (26 U.S.C.)  is pertinent to "income tax".  Income tax
is an indirect-excise type of tax.  This specification is defined
in Congressional  Report #80-19A,  dated Jan. 17, 1980.  Unlike a
"direct" tax,  any indirect excise tax is the result of having or
using  a   special  license  or  privilege  that  is  granted  by
government, such as federal citizenship.  If a State Citizen does
not have  or use  a special  license or  privilege, they  are not
subject to an excise tax.  Some State Citizens are confused about
the income  tax and  believe a  tax is  owed on  the compensation
(wages, salaries and commissions) received by them for performing
some service.  Careful study of this subject reveals that opinion
to be  incorrect.   There is  a tax  on "income", but it does not
include wages,  salaries, tips,  commissions, etc.   This  is  so
stated in  the IRS  Code itself  which  describes  FICA  tax,  in
Section 3101 of Chapter 21, as follows:

     "RATE OF  TAX (A).  "In addition  to other  taxes, there  is
     hereby imposed on the INCOME of every individual a TAX."


       ...  This type is an indirect tax and has been so ruled by
the Supreme Court in Helvering v. Nestor, 363 U.S. 603 609 (1960)
in which it states that the employee's portion of Social Security
is an  "income tax", and is not a premium payment for any kind of
an insurance program.  Notice also that Section 3101 of 26 U.S.C.
separates and  distinguishes a  difference between  "income"  and
"wages".

     This means the  amounts  of  withholdings/contributions  are
determined by  wages earned;  however, contributions/withholdings
are NOT  required until  a State  Citizen earns  an income.  This
statement is  very important  to  the  proper  understanding  and
application of  the FICA "tax".  Simply put, if State Citizens do
not receive  income (profit  or gain),  they are  not subject  to
deductions for FICA.  This is the same authority used for the tax
on income.

     Liability for FICA is NOT the result of being an worker, but
is based  upon the condition that the worker receives a profit or
gain (income).  Section 3102 (B) of 26 U.S.C. strongly influences
employers to contribute and withhold FICA tax from their workers,
attempting to  make the  workplace responsible for the tax if the
worker decides to halt withholdings (volunteering).

       Many  citizens are  confused about  what income tax is and
believe  it  to  be  a  tax  on  compensation  (wages,  salaries,
commission) received  by them  for performing some service.  This
is untrue.   There  is a  tax on  income, but  that tax  does NOT
include  taxes  upon  wages,  salary,  tips,  compensation,  etc.
Taxing these  categories was automatically repealed in 1946, when
it was  ruled that  a tax  on the source (wages etc.) can only be
levied for  a term  of two (2) years once our government declares
war,  per   Article  I,  Section  8,  Clause  12,  United  States
Constitution.   This is  also indicated in the I.R.S. code itself
where it  describes the  FICA tax, in section 3102 of Chapter 21,
which reads as follows:

     "Rate of  Tax (a).  In addition  to other  taxes,  there  is
     hereby imposed on the income of every individual a tax equal
     to the following percentage of the wages ...."


       The government is admitting in section 3101 that income is
income and  wages are wages.  The words income and wages have two
(2) different meanings, thus are not income and cannot be taxed.

       Notice  carefully that  26 U.S.C. 3101 also specifies that
FICA "contributions"  are taxes.   This is an indirect excise tax
and has been so ruled by the Supreme Court in Flemming v. Nestor,
363 U.S. 603, 609 (1060), for employers' portion, commonly called
the matching half. This tax liability directed at the employer is
the result of business operation permitted by government.

     The Supreme Court ruled in Flemming v. Nestor, 363 U.S. 603,
609 (1960),  that employee's  portion is  an income tax and it is
not  a  premium  payment  for  any  kind  of  insurance  program.
Remember, Sec. 3101 of Chapter 21 of Title 26 clearly shows that,
until citizens receive income (profit/gain), they are not subject
to deductions  for the  FICA tax.   This is the same authority as
the  Federal/State  tax on  "income", for until  Citizens receive
income (gain/profit) they are not subject to having Federal/State
taxes withheld  from their  property (wages)  and no employer has
any right  or authority  to withhold property from any employee's
paycheck unless  said employee  voluntarily signs and files a W-4
form with the employer, authorizing the employer  to withhold the
tax at the source.

       The Supreme Court has addressed this issue three (3) times
since FICA was enacted:

     1.   The payroll  deductions of  workers do  NOT go into any
pool or trust fund, but:

     "The proceeds  of both (the employee and the employer) taxes
     are to be paid into the treasury like other internal revenue
     generally, and are NOT earmarked any way."


     2.   The  Court   points  out  that  payroll  deductions  of
American workers  are NOT  payments on  premiums for insurance of
any kind, but are simply income taxes:

     "... eligibility  for benefits  ... (does)  not in  any true
     sense depend on contribution through the payment of taxes".

                   [Flemming v. Nestor, 363 U.S. 603, 609 (1960)]


     3.   Furthermore, payments  made by  employers for  each  of
their employees are NOT matching to be credited to the account of
the employee,  but constitute  an EXCISE  TAX  on  the employer's
right to do business. Consequently, his so-called "contributions"
go directly into the general fund of the treasury and


      "... are NOT earmarked in any way".

                   [Helvering v. Davis, 301 U.S. 619, 635 (1937)]


     4.   Workers  participating   in  Social   Security  payroll
deductions do  NOT acquire  any property  rights  or  contractual
rights through  their payments, as they would IF they were paying
on an  insurance policy  or  contributing  to  an  annuity  plan.
Simply put,  there are  no guarantees!  The Congress has power to
deny benefits  to citizens  even though  they  have  paid  Social
Security taxes. Also, the amounts of benefits are changeable from
year to  year at the option of Congress.  Flemming v. Nestor, 363
U.S. 603, 610 (1960).


     5.   Benefits granted  under Social  Security are  therefore
NOT considered  earned by  the worker,  but simply  constitute  a
gratuity or gesture of charity.  As the Court states:

     "Congress included  in  the  original  Act,  and  has  since
     retained, a  claim expressly  reserving to  it the  right to
     alter, amend, or repeal any provision of the Act."

                   [Flemming v. Nestor, 363 U.S. 603, 610 (1960)]


      In effect, Social Security benefits are like pensions to be
given or withheld at the discretion of Congress.


     6.   Payroll deductions  which a worker pays (a special kind
of  "income   tax")  do   nothing  more   than  qualify  him  for
consideration as  a recipient of a charitable gift.  His payments
do not  guarantee him anything.  They do not guarantee the amount
to be received,  nor  the duration of the gift.  The Congress can
alter or abolish the entire progress at any time.


     7.   From the  Nestor case,  Justice Hugo  L. Black gave his
dissenting opinion  which stated  that the  whole Social Security
thesis, as  expounded by  the majority  of the Court, is that the
government is giving to the participating citizens "... something
for nothing and Congress can stop doing so when it pleases."

    Since the government cannot compel "voluntary contributions,"
then the  workplace must be withholding property on their own, in
violation of authority.  This act is an act of illegal conversion
/theft, and no amount  of arbitrary "commands" or coercion by the
IRS can  justify this  act by  a workplace, as it is unlawful and
creates a cause of action for the worker.


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Richard McDonald