It's getting really bad out there: Perhaps you've heard about Bush's plan to change Social Security. Maybe you've been reading some of the sensible commentators rebut Bush's claims. These rebuttals are generally well thought out, but we regret to inform you that even the good folks on our side aren't thinking critically. Here, for example are some quotes from people who should know better:
Comment:
It is not 12.4% !!
| The misleading percentage | | |
| Wages shown on paycheck | $100.00 | |
| SS withheld from paycheck | $6.20 | 6.2% |
| SS paid by employer | $6.20 | 6.2% |
| Add these two percentages | | 12.4% |
Then claim that workers are diverting
12.4% of their wages to SS | | |
| | | |
| The correct percentage | | |
If the employer contribution is considered
to be part of one's wages, then, in the
example above, wages are | $106.20 | |
| Funds collected by SS | $12.40 | 11.68% |
The truth is, workers are diverting
11.68% of their wages to SS | | |
| | | |
| How much a distortion? | | |
| 12.4% is 1.06 higher than 11.68% | | |
| What is 1.06/11.68? | | 0.0909 |
| | | |
The 12.4% figure is about 1/10th larger than
the actual amount "of wages" diverted to SS | | |
It is either 6.2% of wages, or 11.68% of wages, depending on how you classify the money paid by the employer.
It is not 12.4%. This may seem like a small detail, but in our view it is much more important than the much fretted-over "private" vs "personal" wording debate.
What is especially distressing (or perhaps amusing) is that in Matthew Yglesias'
post, he spends much time arguing about how to calculate the correct percentage of a consumption tax -
by starting with the proper baseline figure. Yet he totally ingores that issue in his passing reference to Social Security taxes.
When every inch in this debate must be fought, why are people on our side -
including economists - allowing the conservatives to use the higher 12.4% number, when it's not true?
[UPDATE: Have we ever used the 12.4% figure? No - except for one quote by Lary Lindsey on a
tangential issue back in the stone age (2002). Neither has
Bilmon or
Paul Krugman, as far as we can determine.]
posted by Quiddity at 5/04/2005 04:56:00 AM
Steve J: I forgot to examine the self-employed. That gets to the issue of what the employer contribution is. Is it not part of an employees' wages (my preferred view), and therefore a free-standing tax on business? Or is it part of an employees' wages?
If the latter, then the rate should definitely be cut to 11.68% for the self-employed.
If the former, then no change to the rate is warranted, because the self-employed is acting as two players, the employer and the employee.
Good point, but while we're truth telling, let's not forget that the percentage is actually lower and lower the more that your income exceeds $90K. A flax tax would be an improvement.
Why is Bush&Co so "concerned" over SS becoming a problem in 2052 when, by the most liberal of estimates, "peak oil" will occur no later than 2020 and by most estimates, has already occurred?
I predict a collapse of the 'Merikin oil economy, descent into a modified fuedal society and SS will be the least of anyone's concerns.
