Saturday, 15 January 2005

Regressiveness

Alex Tabarrok suggests that critiques of the social security tax as “regressive” miss the point:

The payroll tax is regressive but benefits are progressive and on net the social security system is progressive—a 45 year old male with an income twice the national average, for example, will in present value pay into the system $243,700 more than he will receive in benefits. (Part of this net loss comes from progressivity and a larger part from the fact that all currently young workers will pay more in present value taxes than they will receive in benefits). [citation omitted]

I’d say that the system is generally progressive, but there are subpopulations for whom I’d question that conclusion—according to the CDC, the average African-American male born in 1975 or earlier can expect to collect virtually no social security benefits, because he will have died before becoming eligible to collect benefits at age 62.