Equal Opportunity Greed

One of the President’s budget proposals treats tax deductions as if a person’s marginal tax rate were 28 percent, rather than the actual possibly 39.6 percent.  This would bring in substantial extra tax revenue, yet it wouldn’t violate the Republicans’ strong distaste for higher marginal tax rates on the grounds that they allegedly stifle incentives of the rich.  Despite that, they are complaining loudly.

The President is finally proposing indexing Social Security benefits by the chained CPI, a more correct measure of price inflation than the current measure.  Using it would reduce benefit growth and make indexation fairer to taxpayers and recipients.  Yet I have already been deluged by liberal groups’ email petitions objecting to this change.

The only good thing about this sorry spectacle is that it is nice to know there is no shame on any side.

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  1. guest says:

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  2. Alan T says:

    Dr. Hamermesh,

    Could you comment on the argument that the goods and services the elderly consume increase in price faster than the basket of goods and services used to compute the chained CPI? And could you comment on the argument that Social Security benefits should be increased because fewer workers today have defined benefit pension plans?

    See, for example, http://krugman.blogs.nytimes.com/2013/04/05/desperately-seeking-serious-approval/.

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  3. Joe J says:

    Definately not the same thing.

    CPI is the more correct index.

    With the other one we would be switching from the actual rate to an imaginary rate they aren’t being taxed at. Just so that we can punish people hated by the administration.

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  4. Mr. Deutsch says:

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    • James says:

      You’re wrong about Social Security taxes. Just finished doing my 1040-SSE form today, so I have the figures handy. For incomes under $110,100, it’s 13.3% of 92.35% of your income, or 12.28%. And you get to deduct half that from your income.

      As to why people making more than the $113K limit don’t have to pay more, SSI is supposed to be an insurance program, with benefits that correspond to the amount you pay into the system. People making that $113K (for whatever number of years is needed) will already be getting the maximum possible benefit. Why should they have to pay more, when they would get nothing in return?

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    • K says:

      Because someone making $11 million a year probably does not even need Social Security, so why should they have to pay more for your pension?

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    • Enter your name... says:

      Mr. Deutsch has forgotten about the taxes paid by the employer (which, for self-employed people/small business owners, is themselves).

      Social Security has a weird tax system. If you earn $100 in wages, you pay about $6—and your employer (which may be yourself) pays another $6. If we didn’t have this system, your real wages would be about $106, and you would pay all $12 yourself. The net result ($94 in your pocket) is the same either way.

      I believe that the first “reform” that needs to happen with Social Security is to give everyone a “pay raise” of exactly the amount their employers were paying, and then to make the full amount show up on the employee’s paychecks. This will eliminate whining from self-employed people about how they pay “more” (they don’t; it just looks that way on the surface) and get the employers out of the debates about how the program should run (because if the workers pay every dime, then the employers have no business case for favoring or opposing anything about the program).

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  5. Doctor Gonzo says:

    Is it really “greedy” for seniors to worry about cuts to their $1,000 a month benefit? Does Mr Hammermesh have any experience with people who have no other income than their monthly SS check? It makes me wonder.

    Say that both sides have their sacred cows. Say that both sides are more willing to cut one area than another. But to say that refusing to use chained CPI (even if it is more “correct”, whatever that value-laden term means to you) is “greedy” is in poor taste.

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    • Pshrnk says:

      Ya gotta pay for it dude.

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    • James says:

      I don’t see anyone suggesting CUTS to benefits, just using a more accurate index for increases. So if for instance the actual cost of living goes up 5% this year, that $1000 check will be $1050 next year, not $1075.

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  6. elisha says:

    I bet my Grandma wishes she got $1000 a month in SS. She lives off $600 with no supplemental insurance so she pays for most of her meds. Her weekly treat is going to a cheap restaurant chain with coupons. She is probably one of the luckier ones because she gets a treat. Even though she can’t even order what she really wants because it is never on a coupon

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  7. tmeier says:

    First thing to understand is we all pay all the taxes, the economy is a web and while you can distort it ultimately goods and service assigned to people (by giving them money) who don’t contribute in return (or have a negative impact) is what reduces wealth.

    There are two ways to approach the question of taxes, morally and practically. From a moral standpoint everyone should pay for the value of the government services they receive. From a practical standpoint people who can’t contribute services valuable enough to get what is considered a decent material standard of living need to be subsidized and to get the wealth to do that you have to go where the money is, wealthy people.

    The weirdness surrounding this whole issue just astounds me. On the one hand you have people who seem to think they are owed a standard of living and on the other people who think it’s OK to live in obscene luxury while their neighbors are destitute. Capital is what makes our economy work but 10 million dollar homes and yachts with helipads do not. Tax luxury not capital. A person with a billion dollars invested is contributing to the economy, it’s only a problem when they spend the money on themselves.

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    • K says:

      Never look at things from a “moral” standpoint. Morality is relative and subjective.

      Also, a person with a billion dollars contributes to the economy even if they spend the money on themselves, every time they buy something someone gets money.

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      • tmeier says:

        You are making the mistake of thinking in terms of money not wealth. If a single family spends 20 million on a house how many people enjoy the benefit versus 80 two hundred and fifty thousand dollar homes? Rich people spending on material wealth only they enjoy diverts resources to a more narrow channel. I think it’s OK if they want to do that but they have to understand from a social perspective they are being resource hogs. Such anti-social behavior should bear a price in taxes which is proportional to the diversion of resources.

        It’s true the builders of the 20million dollar home get paid but so do the builders of the 80 250K homes so that’s a wash.

        In a democratic system morality is what the people agree on and make into law. As Dr. Johnson observed about someone who gave the moral subjectivity line, “why if he really believes what he says when we have him to dinner let us count our spoons.”

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  8. Gary says:

    The politicians succeed by creating turmoil and conflict. The solution is so simple: 1. Jail them all (because it’s criminal to do this to us) and 2. Create a flat tax rate on all income at whatever rate it takes to pay the bills. Then everybody has an even stake in the game. Anything else perpetuates the madness, distorts the economy, and is less fair.

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