Organization: Penn State University
Date: Wed, 22 Jul 1992 08:11:35 EDT
From: <DGS4@psuvm.psu.edu>
Newsgroups: sci.econ
Subject: Re: Social Security, Pension plans, and Ending the national debt
Distribution: usa
 <7496@public.BTR.COM>

In article <7496@public.BTR.COM>, timlee@public.btr.com says:
>
>DGS4@psuvm.psu.edu writes:
>|In article <7482@public.BTR.COM>, timlee@public.btr.com says:
>|>[rich get more SS than the poor]
>|There are two main reasons why I don't find that wasteful.  First, any
>|examination of successful public policy to reduce poverty will find that
>|universal benefit programs, which don't waste dollars on administrative
>|programs to means-test, are much more successful at reducing poverty.  The
>
>Ok.  I don't dispute that.  But perhaps a more important reason for
>universal type benefits is to eliminate the high marginal tax rate
>bubbles that discourage people on welfare from working.  Note that
>Social Security has this problem as well as other welfare programs.

I'd agree.  I see no reason why certain benefits (age-related, dependent
child related) should have any relationship to work behavior.

>|                                             While this doesn't justify
>|higher payments to the well-off, it does justify universal benefit
>|programs.
>|
>|The second reason is political.  It's a political buy-off to get the
>|people to support a program which re-distributes income.
>
>In other words, you support wasting anti-poverty money by giving
>more to the rich instead of a fixed benefit just because of
>possible political effects.
>
>|>Suppose you could redesign Social Security, other welfare programs,
>|>and the tax system from the clean sheet.  What would you do?
>|
>|Sorry, but I don't engage in fictional what-ifs.  There are no clean
>|sheets; they've already been wet.  In articles I've authored I have urged
>|increases in the maximum earnings upon which the tax is levied, increases
>|in SSI, as opposed to Social Security beenfits, reduced benefits/COLAS for
>|the wealthy, and other minor adjustments in the current system.
>
>Such changes won't fix the structural problems in a welfare and tax
>system that is basically a kludge with many unintended effects.
>
>Instead of Social Security, other welfare, and the current tax system,
>why not:

Why throw out what is basically a workable system?  The changes you mention,
while not without merit, are not politically feasible.  We can achieve most
of what you desire (removal of unintended effects, such as work disincentives)
without completely re-writing current programs.  Furthermore, there's no
guarantee once you enter the political arena that what you intend to create
will be what is created.

>1.  A flat tax rate.  Computing income would still be the complicated
>part, but guessing wage withholding and estimated taxes would be easier.
>No type of income would be treated to a special tax like a payroll tax.
>(If you really want to argue that the rich should pay a higher rate,
>then imagine a higher rate near the top of the income scale; it
>doesn't really affect the argument presented here.)
>
>2.  A standard credit (not deduction).  If this makes taxes negative,
>it becomes a welfare / Social Security payment.
>
>The above scheme would eliminate the disincentive that people on
>welfare face when they consider working (loss of welfare combined
>with taxes can create an effective marginal tax rate of close to
>100% in some cases).  It would also make all deductions usable by
>all people.  It would eliminate the adminstrative costs of means
>testing, and also eliminate the waste of giving richer people more
>benefits.  It would eliminate the current regressive payroll tax.
>By combining everything into one tax, applied to all income, it
>would give a clearer picture of how much taxes there are.
>
Dennis G. Shea, Penn State <<USUAL DISCLAIMER>>
"I believe that there is social and psychological justification
for significant inequalities of incomes and wealth....But it
is not necessary....that the game should be played for such
high stakes as at present."  John Maynard Keynes
Newsgroups: sci.econ