Financing of Social Security-Progressive or Class Rigidifying?

[Walter Hart <tracy.hart@cwix.com>]

James stated :

"The 'rate of return' will vary widely depending on an individual's circumstances, especially their average salary. In general, the higher the salary (below or equal to the FICA max), the lower the 'return'."

My observations:

This is something I have known, but this morning it struck me as weird. 

I am a believer in progressive taxation.  And, supposedly, the benefit structure of Social Security is progressive by giving a greater wage replacement to those who earned less during their working lives.  

What is weird about this aspect of Social Security is this. It puts the greatest tax burden of supporting the retirement benefits of those at the lower levels of earnings on those who are only middle class themselves, while leaving high wage earners and those with other types of income without any tax responsibility for these lower earners.  In short, it is progressive only within the middle class.

I have argued before that Social Security's high payroll tax is a means by which America's class structure will become rigidified and the gap between rich and poor has been widened.  Here again we see how Social Security works to accomplish this end.  Those who reach the higher salary brackets - on the verge of moving up the economic ladder so to speak - are hit with a tax not borne by those with greater incomes and for which they will not receive a corresponding, equitable return.

In short, Social Security once again shows itself to be an immoral scheme.  To the extent Social Security is a "welfare" program - which it is to the extent it gives a greater return to those at lower lifetime earnings levels - its burden should be borne by progressive general federal taxes on all income, not just wages.

Walter Hart