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View Diary: Social Security is Wage Insurance (81 comments)

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  •  Why the donut hole (3+ / 0-)
    Recommended by:
    tardis10, Words In Action, Calgacus

    If raising the cap is not just a mechanism to increase revenue, but also an attempt to reverse the damage done to Social Security's tax base by rising inequality the donut hole makes more sense.

    The reason the share of wages below the cap has fallen from roughly 90% in 1983 to 83% is not because of growth in the numbers of people earning between (in present dollars) $110,000 and $200,000. The big wages gains are above this level.

    I agree that this logic eventually drives you away from the payroll tax concept of funding wage replacement insurance, and more toward the income tax principle (tax at higher rates the income with lower marginal utility).

    The big problem with the tax cap is that it is inappropriately indexed to average wages instead of wage shares. Set the tax cap so that it covers 90% of all covered earnings. That means trends in inequality won't erode the tax base. That said, the remedy for inequality certainly falls elsewhere. It is not a job for the payroll tax.

    Finally, Social security is wage insurance yes, but lets be even clearer:

    Social Security is life insurance.
    Social Security is disability insurance
    Social Security is insurance against inflation
    Social Security is insurance against outliving your assets

    •  Economides, SocSec is all those other things (0+ / 0-)

      as well. My diary just focused on the wage insurance portion of the program.

      "let's talk about that"

      by VClib on Fri Mar 29, 2013 at 07:53:20 PM PDT

      [ Parent ]

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