Social Security a Tax?

Krugman let slip a little semantic misconception 75 years in the making:

And while the income tax is quite progressive, the payroll tax — the other major federal tax — isn’t; and state and local taxes are strongly regressive.

For generations it was sold as a pension, not a tax. The 12.4% of our compensation (up to $106k) given to the government under the rubric of Old-Age, Survivors, and Disability Insurance (OASDI), is clearly not an investment in our future government pension, unless by ‘our’ one means ‘the Borg collective’, not the individual saver.

I suppose soon people are going to start noticing there is nothing in the Social Security trust fund. Here’s a funny description of the trust fund over at ‘Just Facts‘:

Bonds that represent the debt that the U.S. government owes to Social Security are located in a file cabinet at the Bureau of Public Debt in Parkersburg, West Virginia. Below is a photo of President George W. Bush inspecting the documents along with Susan Chapman of the Office of Public Debt Accounting.

About Eric Falkenstein 136 Articles

Eric Falkenstein is an economist who specializes in quantitative issues in finance: risk management, long/short equity investing, default modeling, etc.

Eric received his Ph.D. in Economics from Northwestern University , 1994 and his B.A. in Economics from Washington University in St. Louis, 1987

He is the author of the 2009 book Finding Alpha.

Visit: Eric Falkenstein's Website

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