the absurd observers

Thursday, February 24, 2005

The Jaker on Social Security


The Jaker proposes a solution to the social securty shortfall:

I've said it before, but it's worth repeating. The easiest way to eliminate the projected shortfall in Social Security is to eliminate (or at least raise) the cap on taxable income from its current level of $90,000. It's an immensely popular solution - 81% (the number of the day) support it, versus less than 50% who support benefit cuts, retirement age increases, etc.

It is important to recognize what exactly this proposal entails. If this proposal is in fact meant to generate money for the system without also generating greater future debt, then it must not only be that the cap on taxable earnings is eliminated, but that the money generated will not be repaid as part of social security benefits when such people retire. Essentially this proposal is merely a tax increase on upper-incom wage earners.

As a general priciple, taxes on the wealthy have been far too low. The question, however, is why do this through the ruse of social security. People who demand the benefits of social security argue that it is not a redistribution scheme, but rather a pension/insurance system in which people have earned the benefits they receive by paying into the system their entire lives. Despite the fact that beneficiaries usually take out well more than they pay in (and any interest that money would have generated), this tortured claim has always afforded social security a certain legitimacy that other redistribution schemes lack. When the system simply becomes tax the rich and a distribution to the old, hopefully the redistributive nature of social security will be more evident.

Additionally, it seems foolish to tie such a redistribution scheme to payroll taxes. Even if you buy the argument that old people have right to a comfortable retirement on the backs of everyone else, tying the scheme to the payroll tax only targets wage earners and does not touch people earning income from other sources. If we are merely redistributing money from rich to old, it seems most just to tax income, not just wages.

Of course, since defenders of social security already look favorably on people who recieve money for doing nothing productive, who knows?


  • Seth,
    It's obviously redistributive, as are most taxes that pay for social services. Rich people pay more taxes, but don't use roads more. Our society taxes progressively - higher earners don't just pay more taxes, but pay a higher percentage. So I think there's nothing wrong with making SS a little more redistributive to avoid poverty in senior citizens.

    Again, I'll call you on it. You've talked about your theoretical problems with social security. So how do we fix it?

    By Blogger CB, at 4:42 PM  

  • Well evidently you missed the part about social security proponents constantly claiming it is not redistributive, but that aside, there are some obvious solutions that would make it much more equitable which I will post to the main page shortly. The reason why most proponent s resist the claim that it is a redistribution system is because it is obviously unfair as such. Think about it for a second... As a redistribution system, the working poor get taxed while the retired rich get benefits. Other than by some claim of right based on prior contributions, how can that be justified?

    By Blogger Seth Y, at 5:38 PM  

  • Rich getting benefits is not justified. And it is part of the Democrats' plans to reduce benefits to wealthy seniors.

    By Blogger CB, at 8:17 AM  

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