Back when Social Security was first being put in place, there was a lot of concern that SSN's would become a "national Identification Number", and there were laws put in place to prevent this. However, said laws were largely ignored and SSN was pretty frequently used for all kinds of non-governmental purposes. In the last decade or so, there has been a renewed concern about SSN due to identity theft, and PII or Personally Identifying Information. It's now highly discouraged for anyone to store SSN numbers, although they can be still be collected for certain things like opening bank accounts and what not to prove citizenship, as well as to report to the IRS.

IMO the IRS should not be using SSN's for identification. But i'm not sure what else they can use.

Generally I agree, but ...

> Social Security Number in the US pre-dates the internet and any concerns people had about privacy.

People in the US were concerned about privacy long before the Internet. The 4th Amendment to the US Constitution dates back to the 18th century, for example.

In fact, I'd say people are much less concerned about privacy in the Internet era; they put everything online and happily give private info to corporations and government.