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January 11, 2005

Raising Cap No Increase in "Investment" for Most

Reacting to my post on raising the cap on earnings taxed for social security, Cold Spring Shops wants to pretend that this will cost beneficiaries more money just like other proposals:

In order to preserve the same level of benefits (or, perhaps, some more conservatively indexed benefits) he is proposing to redefine the contributions...benefit stays as promised. The investment individual taxpayers make to secure that benefit rises. The return on their investment falls. Isn't that the argument the privatizers are making, which is resonating with younger workers?

We aren't "all in this together"; different proposals will benefit or hurt different income groups quite radically. Raising the cap on earnings won't cost the vast majority of workers a dime-- if structured right, we could probably generate enough new annual cash to cut the social security tax rate for most workers.

And this illustrates the bait-and-switch rhetoric of conservatives on the issue; they talk about "us" when what they mean is rich folks who are the ones who benefit from privatization or would have to pony up a bit more cash in progressive proposals. All raising the cap on earnings does is say that the poor should not be taxed on a large percentage of their wages to pay for seniors when we are leaving most of the income of the wealthy untaxed for that purpose.

And all this talk of "return on investment" is ridiculous. We don't tax people to pay for education based on whether they are getting an adequate return on their investment. Should single people be exempted from school taxes on that basis? There are serious expenses families face at each stage of life, particularly to pay for the expenses of the young and the old who are not working. Why single out social security as the one program we expect to measure on its individual returns?

Update: In comments, Steven from Cold Spring Shops responds: "We don't [tax people to pay for education based on its return on investment]? School taxes are included in property taxes, and property values are higher in communities that have higher test scores."

Steven actually gets the math exactly backwards. Rich suburban property tax RATES with good schools are usually lower than the tax RATES in poor areas with terrible schools. I wish we had uniform tax rates where rich parents had to pay higher tax rates for their nice schools, but it doesn't happen in our screwed up school finance system.

If Steven's point is that our school finance system is in far more of a crisis than social security, then I fully agree. Let's drop all this discussion about social security and deal with an issue like equitable tax systems to fund public education. There's an issue where we can get some consensus that changes are needed.

Posted by Nathan at January 11, 2005 08:47 AM