5 ms·

That income tax statistic is misleading. Most Americans do pay social security payroll taxes, which are income taxes, they’re just not called “income tax.”

jdavis703 5y ago
Even though social security is administered as a pay-go program, the amount of social security you can withdraw is based on how much you put in. This makes it much more like a forced savings account than a tax.
shados 5y ago
Social security is more of a forced 401k. You will get back the money (in theory), but yes, it's not progressive and impact the poor more than the rich. It's a bit of an iffy one. If the social security system rolled up into federal income tax, it would be much more progressive, but it would likely receive significant pushback in the political space (not knowing its history, I assume it was structured as a separate thing exactly for that reason. I should read up). Still, the point still stand: federal income taxes are quite progressive, and would surprise most people who wave their angry fist asking for the rich to be taxed more. The problem is mostly at the state and local level. The top 50% pays 97% of federal income tax. If you include most types of taxes, including social security, you end up with something a little less polarized: the top 1% have an effective tax rate of a little under 34%, while the poors are around 20%. One could easily argue it's not progressive enough, but it's still not the usual narrative of "I pay more taxes than millionaires". A a handful of ultra rich abuse loopholes to death to pay very little, and these people are averaged in the statistics (so the average rich person actually pays more than the stats show, if only a little). It's a minority though.
- tshaddox 5y ago
  > Social security is more of a forced 401k. You will get back the money (in theory) Don't you get the value of the money back for all taxation, according to any theory that approves of taxation?
  - shados 5y ago
    Not nearly as directly though. Social security is basically money in -> money back. A glorified forced 401k, or at worse a kind of retirement insurance. It's a bit more separated. When I pay taxes, I don't get a direct return for it, I get (in theory) a fully functioning society. Social security would be a little closer to a sewer and water bill from the city (which you have to pay if you're a owner, but you get a sewer in exchange. Whether you like it or not). It's still not a great analogy because Social security is more deferred. It's really its own thing. Still, it doesn't work quite like a tax either. I personally wouldn't mind if it did though. It's one of those things where we'll pay for it one way or another. If there's an entire generation of people who can't properly retire and pay medical bill, we will pay for them through taxes anyway. May as well do it preemptively and efficiently.
    - medvezhenok 5y ago
      It's not quite a forced-401k though. Social security could technically be abolished (or payments diluted, etc) via an act of congress (even though politically unfeasible right now) - then you don't get anything out of your "investment". It's much harder to "abolish" a diversified 401k plan unless you abolish all private property (i.e. Russia 1917).
      - shados 5y ago
        Yup, like I mentioned, it's really its own beast, and all analogies will be flawed in some ways. But it also doesn't work quite like other taxes, at least in practice.
  - jdavis703 5y ago
    > Don't you get the value of the money back for all taxation, according to any theory that approves of taxation? Roughly speaking, anyone paying more in taxes than the per capita spending is probably not receiving the full value of their taxes. We see this where most welfare (Pell Grants, SNAP benefits, Obamacare, etc) and tax credit schemes (CTC, electric car credit, etc) phase out as people pay more taxes.

jdavis703 5y ago

Even though social security is administered as a pay-go program, the amount of social security you can withdraw is based on how much you put in. This makes it much more like a forced savings account than a tax.

shados 5y ago

Social security is more of a forced 401k. You will get back the money (in theory), but yes, it's not progressive and impact the poor more than the rich. It's a bit of an iffy one. If the social security system rolled up into federal income tax, it would be much more progressive, but it would likely receive significant pushback in the political space (not knowing its history, I assume it was structured as a separate thing exactly for that reason. I should read up). Still, the point still stand: federal income taxes are quite progressive, and would surprise most people who wave their angry fist asking for the rich to be taxed more. The problem is mostly at the state and local level. The top 50% pays 97% of federal income tax. If you include most types of taxes, including social security, you end up with something a little less polarized: the top 1% have an effective tax rate of a little under 34%, while the poors are around 20%. One could easily argue it's not progressive enough, but it's still not the usual narrative of "I pay more taxes than millionaires". A a handful of ultra rich abuse loopholes to death to pay very little, and these people are averaged in the statistics (so the average rich person actually pays more than the stats show, if only a little). It's a minority though.

tshaddox 5y ago
> Social security is more of a forced 401k. You will get back the money (in theory) Don't you get the value of the money back for all taxation, according to any theory that approves of taxation?
- shados 5y ago
  Not nearly as directly though. Social security is basically money in -> money back. A glorified forced 401k, or at worse a kind of retirement insurance. It's a bit more separated. When I pay taxes, I don't get a direct return for it, I get (in theory) a fully functioning society. Social security would be a little closer to a sewer and water bill from the city (which you have to pay if you're a owner, but you get a sewer in exchange. Whether you like it or not). It's still not a great analogy because Social security is more deferred. It's really its own thing. Still, it doesn't work quite like a tax either. I personally wouldn't mind if it did though. It's one of those things where we'll pay for it one way or another. If there's an entire generation of people who can't properly retire and pay medical bill, we will pay for them through taxes anyway. May as well do it preemptively and efficiently.
  - medvezhenok 5y ago
    It's not quite a forced-401k though. Social security could technically be abolished (or payments diluted, etc) via an act of congress (even though politically unfeasible right now) - then you don't get anything out of your "investment". It's much harder to "abolish" a diversified 401k plan unless you abolish all private property (i.e. Russia 1917).
    - shados 5y ago
      Yup, like I mentioned, it's really its own beast, and all analogies will be flawed in some ways. But it also doesn't work quite like other taxes, at least in practice.
- jdavis703 5y ago
  > Don't you get the value of the money back for all taxation, according to any theory that approves of taxation? Roughly speaking, anyone paying more in taxes than the per capita spending is probably not receiving the full value of their taxes. We see this where most welfare (Pell Grants, SNAP benefits, Obamacare, etc) and tax credit schemes (CTC, electric car credit, etc) phase out as people pay more taxes.