Will Wilkinson writes:
- * The Social Security tax is regressive.
- * The overall benefit structure accomplishes, on net, either no downward income redistribution, or a small amount of upward redistribution. (I.e., it is either close to a wash, or regressive, redistribution-wise.)
- *The system is structured to disadvantage current workers over current retirees, and is thus invalid as a “compact” between generations, if we take the contract metaphor seriously.
- * Because the Social Security tax hits least wealthy workers hardest, Social Security prevents many from accumulating wealth, and reinforces the divide between investing an non-investing classes.
- *Social Security makes it impossible for many of the least wealthy to accumulate wealth that they can pass on to their children or grandchildren, thereby helping to perpetuate generational inequality.
It is crucial to note that whatever else it might be, Social Security is not PRIMARILY insurance, if it is insurance at all. The redistribution to the elderly poor it does manage to effect is incidental to the huge volume of transfers back and forth from within the same income bracket. (Net income-related redistribution come to less than 10% of total transfers) There’s a huge amount of deadweight loss in all this pointless churn.
A system of personal accounts plus a means-tested safety net would:
- * Be more progressive in every way.
- * Eliminate most of the unjust intergenerational transfers that are at the heart of the current system.
- * Almost entirely close the gap between the investing and non-investing classes.
- * Help the least wealthy workers accumulate inheritable wealth.
- * Protect the elderly against poverty AT LEAST as well.