Regressive Social Security Tax

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Stuart Buck wonders why so many liberals are so resistant to a radical change in social security, despite their acknowledgement that it needs to be fixed. After all, the social security tax has a refressive structure, the opposite of the progressive income tax. If you privatized social security, it would go into the progressive structure of taxation, and rich people would actually put in more and poor people less, while poor people would receive more and rich people less. As it is, it's the opposite of that. Poor people pay the highest percentage of their overall income, and rich people the lowest, yet higher income people get more out of it. Stuart points out that this is genuinely stealing from the poor to give to the rich. Maybe there are other problems with the privatization plans, but this seems to be a real problem that I've never seen anyone on the right or left talking about, and it's exactly the sort of thing people on the left are so principled against.


It is true that the current social security tax is regressive. One point to consider is that the money equates to an investment with a return of 1 or 2 percent a year if you can call that an investment. The average mutual fund returns about 12 percent a year when averaged over a typical working career. It is really a raw deal for everyone when we are forced to invest at 1 or 2 percent when we would average about 12 percent if we invested it on our own. The 12 percent equates to a huge return on the investment over a working lifetime vs. a negligible return with the current 1 or 2 percent return.

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