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.

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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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