Taxes in America: Giving back to the community
I DON'T really know quite how to dip my toes into the argument my colleagues are having about the merits of Barack Obama's stump speech arguing that rich people should give back to the community by paying higher taxes. My colleague W.W. is right that while achieving wealth in America obviously presupposes the existence of economic infrastructure, good governance, and a functional society, this does not in and of itself imply that rich people are not already paying high enough tax rates. To make that argument, you need to actually look at how much rich people are earning, and how much they're paying in taxes. And my colleague D.R. is right that when you do so, you find that the total tax rate in America today is very close to flat across the entire income spectrum. Unless you think the flat tax is a good idea, that seems to imply that rich people ought to be paying more. And my colleague R.A. argues that the fundamental point is that in a democratic society, the majority needs to feel that the economic system is fair, or they will push to change it.
The question remains, though, whether they're right to feel that it's unfair. Hence we have my colleague W.W.'s rejoinder that taxes appear flat only if you take Social Security and Medicare taxes into account, but that to do this throws out the premise that these taxes are premiums on social insurance and thus separate from other government expenses. I think there's an important point here, but it's not about social insurance per se; there seems to be an elision here between social insurance, on the one hand, and forced savings, on the other. If a programme were in fact social insurance against poverty, you would expect to see its ratio of premiums to benefits look very progressive. But Social Security isn't really progressive in that sense; people who collect its retirement benefits get about the same ratio of payout to contributions regardless of how high their lifetime income was. So it's not really insurance against poverty caused by the normal course of economic life. Social Security's disability and spousal death benefits are very progressive, but that's because becoming disabled or losing your spouse young leads to lower income; obviously disability insurance redistributes wealth from the rich to the poor, because becoming unfit to hold a job makes you poor.
Anyway, I don't really see why lifting the cap on the payroll tax (as many liberals want) or means-testing benefits (as many conservatives do) would destroy Social Security's character as a social-insurance programme. Medicare, obviously, is a social-insurance programme, and it has no income cap. But at this point the argument has become so complicated that the moral stakes seem to have swirled away in the muck, and I'm no longer sure I understand what the argument means for the question we started out discussing.
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