Sunday, February 27, 2005

More Tax, No Benefit = Stealing

Primer Sets has an excellent analysis of the February 7, 2005 memo Estimated OASDI Long-Range Financial Effects of Several Provisions Requested by the Social
Security Advisory Board
. However, the prescription is all wrong:

...Plan 14 is a progressive tax increase. It eliminates the payroll cap making all earnings (all payroll, interest on savings, dividends on
stock, capitol gains, etc…) subject to SS tax. It maintains the cap for benefit calculations. Though it may seem especially unfair for the millionaires and billionaires, some iteration of this plan may be the way to go.

Additional taxation without additional benefit is just plain old stealing. As Americans we can all do better than that and solve the challenge of retirment security for all without resorting to theft. Porkopolis posts a rebuttal in the comment section.

Posted comment:


An excellent analysis. Thank you for constructing it. But you bury, acutally overlook, the lede; and your 'progressive' solutions are well intentioned but ruinous.

The memo itself makes the following statement:"However, as the corresponding numbered tables show, sustainable solvency would not be achieved under any single one of the proposed provisions. Sustainable solvency is indicated if the TFR (Trust Fund Ratio) is projected to be:

1. Positive throughout the 75-year projection period, and
2. Either stable or rising at the end of the 75-year period."

The problem is the structure of Social Security; it's a pyramid scheme. Personal Account proponents seek both a secure retirement for all and a sustainable system. The taxing of incomes above $90,000 at 12.4% with no additonal benefits is a non-starter. 'It ain't gonna happen' That's stealing! As Americans, we can do better. Fixing Social Security does not have to be a zero-sum game.

In the spirit of dialogue and knowledge transfer, may I suggest you review the following two posts:

The illogic of reform opponents

Albert Einstein for Private Accounts?

The first post makes the case that retirement security in any form (current Social Security pyramid strucutre or Personal Accounts) presupposes a growing and vibrant economy. Both strategies need this condition to exist. If one doesn't believe this, then answer the following simple question. Without payrolls, where will payroll taxes come from? A growing economy is the 'egg' to the retirement security 'chicken'.

That being the case, why would Personal Account opponents vigourously make the case against private investments using economic risk as the cornestone of their thesis. That same economic risk puts the current Social Security system at risk as well. As a person of science you know that there is no perpetual motion machine. There is a corollary in economics. Almost all living systems (few exceptions), economic or biological, eminate from the Sun. We can learn from history and structure a sustaining economic strategy that maximizes benefits for its citizens' with the time the Sun has given us. (Until we can create our own new Sun...but I digress)

The second post has actual calculations rebutting a reform opponents claims that a worker investing in the stock market during the Bush Presidency would have lost money.


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