Summers' continuing education. Also: Presidential Condi. Uranium mixes. Fits of moderation. Plus much more.
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p>I wanted to add another dimension to your “Small Business
Buster” analysis of busting the cap on Social Security payroll tax
that does not seem to see the light of day enough (especially in
Ivins’ writings). I’m a Property Casualty actuary so my direct
expertise is not in Social Security but I’ve had to study more
about SS in my actuarial training than many people could stomach.
The issue is… In exchange for capping the amount of payroll tax
contributed by high wage earners (i.e., those making over the cap)
high wage earners receive a relatively lower amount of benefits
upon retirement by way of a lower wage replacement ratio used in
the formula to calculate retiree benefits. The lower wage
replacement ratio for high earners does not seem to get a lot of
attention in this debate but the fact that there is a cap on SS
wages does. The cap on SS wages has been misused to suggest that SS
taxes are regressive. The regressive idea is flawed because it does
not look at the benefits side of the equation which is higher for
low wage earners and lower for high wage earners when measured as a
percentage of preretirement wages. The interplay between the cap
and the wage replacement ratio instills an element of actuarial
fairness in the program.
David Hogberg says it is unfair to raise taxes on those who make
over $90,000 and get nothing in return. What about all the schmucks
who got taxed and will get nothing in return because, as Hogberg
seems to advocate, the surplus that was loaned to other govt.
departments is worthless. In other words, all the poor people were
paying a huge regressive tax for the last 20 years. They did so
with the promise they would get it back. Now conservatives are
flipping the script. Is it fair to tax the rich in this case? You
David Hogberg replies:
Could you explain to me why it is fair to tax the rich because the
government screwed up the Social Security system for the poor? (By
the way, the poor will still get their Social Security benefits —
how that will happen is one of the reasons we are having the debate
over reform.) It was not the “rich” who caused this mess, so how is
it fair to single them out for fixing it?
Re: Michael Gronewaller’s letter (under “Thanks A Lott”) in Reader