Max, this is a very informative post. Quite a few people complain about paying
school taxes because they do not have any children in school. Here in Chico, we
finally passed a school bond on the fourth try. But it was close to failing
again.
I worry that the same could happen to Social Security. Admittedly, we don't
hear much resistance since Peterson's "movement" in which young people complain
about paying Social Security taxes has disappeared.
I do appreciate the perspective that you offer in your note, despite the muffled
dig at your bete noir.
Max Sawicky wrote:
> A basic feature about Social Security that seems
> to be under-appreciated is that it is already
> 'means-tested' to a degree. It's not an either/
> or proposition. First of all, the benefit formula
> is redistributive, which is the same thing for
> practical purposes as 'means-tested.' It just
> happens that "means" is defined as past
> earnings, not present earnings or present
> income. Second, SS benefits are taxed under
> the progressive personal income tax. Third,
> although nobody here may believe it, the payroll
> tax is progressive up to the ninth income decile,
> according to CBO estimates of past years (when
> CBO was a more reliable institution than
> presently). Fourth, we have an Earned Income
> Tax credit, the base for which is the same
> as that for the payroll tax, so there is already
> an offset to the payroll tax for those with incomes
> below $30K or so. Fifth, Medicare is 'super-progressive'
> in the sense that the same substantial benefit package
> goes to all who qualify, irrespective of their past
> earnings.
>
> >From this standpoint, allowing
> SS beneficiaries who work to keep more of their
> benefits should not be such a big deal. Note
> that in Rorty's personal example, he said his
> benefits of $1,600 per month would be reduced
> to $1,000 after taxes. This reflects a marginal
> tax rate of 37.5 percent, which is not so awful.
>
> Getting rid of the earnings
> limitations has not been a major part of the debate,
> it has nothing to do with privatization, and it has
> been a bi-partisan cause. It is wrong to depict
> this as some reactionary idea that the Dems are
> caving on. The late Robert Eisner, our most staunch
> mainstream liberal in defense of Social Security
> (author of "Social Security: More, Not Less"),
> argued strongly the earnings test.
> Any implication in the Rorty column that Soc Sec
> should be means-tested is weak at best.
>
> I am glad to see everybody against means-testing.
> But consistency would dictate that you should then
> stop criticizing the 'regressive' payroll tax.
> It's not as if high-income people can't see the
> commonality between means-testing benefits and
> taxing salaries over the $76,200 cap.
>
> Another fact is that the SS estimates arise from
> the economics profession, not from politicians.
> The Repugs were scarcely aware of these until
> relatively recently, when they thought they could
> use the projected shortfalls to attack Medicare.
> They failed miserably. Clinton used "protecting
> Medicare" (i.e., paying down unrelated public
> debt) as a weapon against big tax cuts. Big
> tax cuts are dead, at least for the time being.
> The source of these projections is the Brookings/
> Urban Institute/AEI combine. In other words,
> mainstream neoclassical macro-economics. It is
> from these economists -- centrists like Henry Aaron
> and Charlie Schultze -- that the deficit panic
> first arose. The only cross-current in this has
> been the Brookings opposition to privatization
> (arguably on the grounds that it would reduce
> net national saving, their be-all and end-all).
>
> Re: NN:
> " . . . If people can keep working, yet pick up their full social security
> check, how is this different from a government 401K plan? . . . "
>
> Because Soc Sec is defined benefit, unlike 401K's.
> Privatization is about defined contribution, by
> and large. Alleged higher returns are the bait
> for privatization.
>
> " . . Worse, if this reform encourages a lot more upper-income folks to keep
> working into their late 60s, it will create broader political support for
> increasing the retirement age, . . . "
>
> Not necessarily. If you can get benefits and work after
> the "retirement" age, you should want to lower the retirement
> age, not raise it.
>
> Finally, weep not for Louis. As it is he barely reaps a
> fraction of what he sows.
>
> And now I will retire.
>
> mbs
--
Michael Perelman
Economics Department
California State University
[EMAIL PROTECTED]
Chico, CA 95929
530-898-5321
fax 530-898-5901
