Hey, I know this is a "minor" blog but it would be nice to get a byline or a writing credit every once in a while. Just a little kudos, you know? Anyhoo, writing in Opinion Journal, Lawrence Lindsey goes a little further into Barack's SS scheme:
There is a very good and principled reason why Social Security taxes are paid on just $102,000 of income: Benefits are calculated based on that same $102,000 of income.Lindsey goes a little further into the tax ramifications to find that entrepreneurs - the engine of the economy - would take a disproportionate hit that would depress projected tax revenues well below what Obama claims could be collected.
The fundamental principle of linking taxes and benefits was established when Roosevelt designed Social Security. He wanted to make sure that it was not a welfare system, calling Social Security "a base upon which each one of our citizens may build his individual security through his own individual efforts." His instincts have generally proved sound. Had Social Security been considered "welfare" rather than a return on taxes earned, it probably would never have had the popularity or the staying power that it has enjoyed for the last seven decades.
Although the formula connecting benefits to tax payments or "contributions" has evolved slightly over time, it still adheres to this basic message. Today, what Social Security terms a "low-wage" worker will pay (in present value terms) $77,197 over his or her lifetime and get $112,261 in benefits. A median-wage worker earning $42,000 will pay $171,550 and get back $187,085. A "high-wage" worker making $67,000 will pay $274,480 and get back $245,085.
Under the current formula, lower-wage workers get a slightly better deal than do higher-wage workers, assuming the same life expectancy. But the principle remains that as workers' wages rise so do the taxes they pay, and so do the benefits they will get from the system.
Sen. Obama would do away with this principle by requiring higher-end workers to pay taxes without getting any extra benefits linked to their higher contributions. This would be a big step toward turning Social Security from a contributory pension scheme into just another welfare program.