Quote:
Originally posted by Mmmm, Burger (C.J.)
Alright, I'll go on the merits, so we can talk more about this.
1) see previous post--you're issuing government debt to buy into the market. As a financial matter, you''re just swapping one form of debt for another, with greater gov't guarantees.
2) how do you define income--cap gains? withdrawls from IRAs? And you're taxing the poor on their first dollar of income--how do you do that? If you're going to do this, why not a national sales tax instead?
3) I think you've hit 3 in 2, but taking the cap off is a fundamental conversion of the program, although I agree that if you're just calling it a surtax this makes sense. But you're getting even further afield from the concept of a limited gov't pension. and how do you answer the pressure to uncap benefits as well?
4) no one who makes few contributions gets big payments, other than SSI. It's based on your wages over a lifetime, so right or wrong, your payments in relate to your payments out. And if there's one benefit of a gov't guarantee is that it will pay even if tax revenues aren't large. If we're going to take this approach, let's take it first with other programs, such as defense and discretionary spending. Not that tax-cycle spending is the most sensible approach.
5) You're taxing all of those accounts at some point, and, other than with Roths, all of the income/gains as well. Indeed--you have to withdraw from IRAs, so you have to pay the tax, either in retirement or when you die. Worse, eliminating (or reducing) tax deferral is exactly the wrong direction to encourage savings. Better to increase the availability of these accounts, but increase taxes on all spent income--either a consumption tax or a national sales tax. And since you tax on withdrawal, how to you account for interim taxes paid without having it become a wealth tax? What is the objection to having people accumulate "enormous assets"? Either they've done it by working hard and saving or by savvy investing. I don't see why either should be penalized (and it's not like these accounts were created by Rockefellers dumping all their assets into a tax-deferred account--IRAs and 401ks have always had contribution limits, so any value increases are a result of modest levels of saving.).
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The only "free money" (hi, Hank!) I found in my five points was in one, and, sure enough, there is no free lunch -- it has an impact on other government expenses and programs because we have to borrow from the market. (1) is a philosophical question: when we measure the extent to which SS is in balance, do we assume that one role of the program that must continue is its subsidy of other government programs. I'm answering no.
Yup, I change the tax burden for social security and fundamentally change the idea that there is a limited pay in, and the argument that you should take the cap off the benefit is legit. Let's tier that, though, so we only do it if we can afford it. Am I overlaying on this a Democratic approach to costs and benefits - yes.
I don't like sales taxes. It is a substitution of one tax that disincentivizes business activity for another tax that disincentives business activity. So that's why I didn't propose it. At the same time, I think I have slightly fewer objections to consumption taxes than wage taxes, so I'd consider it as an element.
And, yes, you are taxing retirement benefits at some point, but the deferral is a huge benefit. What are we doing providing enormous benefits for $2 and $3 million dollar indidivudal retirement pots if we can't afford $12,000 a year for grandma who lives in an old broken down ranch in Missouri after working her whole life? If you remove the wage tax you'll have a more direct incentive for business than by whatever impact lessening deferral has on the savings rate.
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