Obama's Social Security proposal - I really don't have time to give this issue justice (gotta work tomorrow) but Barack Obama's plan to raise the cap on FICA taxes leads to one very important question:
A central tenet of Social Security has been its universality or, if you will, egalitarianism. Everybody pays into the program and everybody receives a benefit proportional to the amount put into the system over a working lifetime. If, say, Bill Gates pays a much larger proportion of his income over the current cap of $102,000, will he receive a multi-million dollar benefit check when he turns 65? Or is Obama's plan to take the extra tax money and use it to pay other people's benefits, turning Social Security into a welfare program?
As I've noted before, the cap on the income subjected to FICA taxes was set by Franklin Delano Roosevelt because he knew the program would have no political support if the John D. Rockefellers of the world were receiving massive benefit checks. Obama (and others) seem willing to sacrifice the equality of the program to paper over institutional problems that cannot be solved with the largest marginal tax increase in history.
Extra - Much more discussion via Memeorandum.
1 comment:
Raising the cap is fine because it becomes the best of all taxes, a flat tax. The higher the cap, the better.
As to the funds collected, the government must immediately spend or otherwise return to circulation every penny it takes in, lest the money supply fall. As such, the collected money is no different from any other collected funds. It all goes in the same pot. The government can't save (nor can ``everybody'' if they try to do it all at once).
I'd just make SS payments an inflation-adjusted annuity guaranteed so that you won't outlive your savings ; it needn't be at a multi-million dollar level for anybody. Think of it as being financed out of general funds, which it is.
Balance the budget by raising the retirement age to fit.
None of this is hard.
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