Means testing would eliminate the program entirely. The affluent elderly, like every family member of mine over 65, would scream bloody murder. And they all vote.

If social security were means-tested, why should I support its continued existence? If I'm going to get nailed for an additional 15% of my income(my self-employment income is not insignificant), what's in it for me? Let the poor old folks freeze, and starve in the dark.

Bart:

Exactly.

Bart: If means tested, it becomes in perception the welfare program that it is in reality.

How would increasing the tax help "reform the SS system"? Once you look past the smoke & mirrors, to government just spends all the SS money they collect. It's not as if they actually put any of it away.

Ray: It helps pay the so-called "transition costs" in moving to a partially-privatized system.

Duh on both.

If there is no threshold, then it instantly becomes apparent that the payroll tax is just a component of the income tax.

Even more serious, if you means-test Social Security then much of the population (acting smarter than the boneheads who advocate means-testing) just gives up saving (you just eliminated their incentive to save get caught with some assets at retirement age).

ZF: Medicare already gives people that incentive, and you should see the money spent on coming up with ways to dump assets without, you know, actually getting rid of them.

Nonetheless, means testing SS is tricky, not only to avoid the moral hazard but to take account of the fact that, with the elderly, you need to worry about wealth more than income. Nothing we can't get around, though.

RE: "If there is no threshold, then it instantly becomes apparent that the payroll tax is just a component of the income tax."

At that point it becomes infinitely easier to reform both SS and the income tax.... i.e., you really can't get close to a flat tax if 1) low income earners pay the SS tax, 2) middle income earners pay both SS and income taxes, and 3) high income earners only pay income taxes on most of their income.

But if there is no maximum for the payroll tax, and a mininum for the income tax, then progressivity is retained even with a single-rate income tax.

I haven't had the time to do a thorough analysis of income tax reform. (I did a lot of work on this back in 1995-96.) But this one seems a no-brainer, on political and economic bases.

SS is already means tested, by the IRS.

At least some states with a state income tax also tax SS benefits.

The government giveth and the government taketh away.

As far as all earnings taxed goes, Senator John Edwards can tell you how to beat the payroll tax.

Apparently, in 1995 John Edwards earned approximately $20 million of legal fees inside his S corporation. By paying out a salary to himself of only $360,000, he avoided paying about $600,000 in Medicare taxes (at the prevailing 2.9% rate).

Means testing SS penalizes virtuous behavior, particulary when combined with the double taxation accruing to "unearned" income.

Jeff:

Giving people a government benefit who don't need it makes a mockery of good purposes.

If the government means-tests social security then it merely has perpetrated a criminal fraud against the American people. Were a financial planner to do the same thing, take a percentage of his clients' income, promising them a specific future return and then reneging, he would be in jail.

However, the political class engages daily in frauds so slimy, that even a Jersey City used car dealer would be ashamed.

OJ:

Giving the government my money in return for a promise to get money back after 65 is not a "benefit." And I'm not at all sure precisely what this "good purposes" thing is you are talking about; I'm pretty certain that whatever it is, it isn't part of Social Security.

Which means such means testing would be fraud.

Never mind that, though. Whatever violence means testing does to "good purposes," it is at least as violent to virtuous behavior.

That's OK, I can live with that. I saw a long time ago that the government would end up defrauding me; despite that, and the equally fraudulent double taxation, I invested instead of spent.

Recovering from pyramid schemes will always be ugly, no matter how "good" the purposes.

Promise?

Bart:

fraud? No one ever said you'd get anything.

The entire system is predicated on the fact that we all start collecting when we hit 65. The government has always understood that if there were no expectation that current payers would receive cash, that they would refuse en masse to pay into the system. Thus, the government has maintained us in our belief that we will get paid at 65, it has deliberately encouraged that expectation. That is fraud. It is in fact fraud so severe and so obvious that it would certainly be criminal if your stockbroker did it.

That was the predicate when life expectancy was 65 and there were not tax-advantaged private retirement vehicles. It's 2004, not 1934.

The government has never changed its tune. If it did poor analysis causing it to misunderstand what the future would bring, it's their problem, not mine. If the government were an insurance company that took a premium from someone for life insurance with a cash-out option at age 65 and when the payer turned 65 the money turned out not to be there. In that case, the insurance company would be shut down and there would be Federal and State investigations. When government bungles the numbers and then tries to fudge things why should it be treated any differently from a life insurer with bad actuarial advice?

it? It is us.

OK, then....how about we "means test" the contributions? Oh, dear. What's that? Looks like I can't afford to send the IRS the 12.4% "self employment" tax today and subject the $ to paltry SS rates of return -- which is apparently just a front for a roulette bet that I might see some of it at age 65. No thanks -- I think I'm entitled to keep it.

What do you mean 'we', paleface? :)

If the government doesn't have enough money to pay what they owe me for SS when the time comes, let them cut some of their spending. I'm sure if we got rid of the NEA, the Corporation of Public Broadcasting, ended our contributions to the UN, pulled the troops back home out of NATO, stopped creating safe havens for Muslim terrorists, drug dealers, white slavers and pimps in the Balkans, ended food stamps, the Dairy Compact, crop subsidies and other agribusiness welfare, and programs to reintroduce predators into the wild where they can kill livestock and their owners, there would be more than enough money for the government to fulfill its contractual obligation to me and others similarly situated.

Bartr:

We'd rather keep the troops and cut your SS.

Who's 'we?'

If I went to every American household making $100,000/yr and asked them if they wanted to maintain troops in Europe to defend France and Germany or whether they wanted Social Security, they would all, and I mean all, say in their best Goodfellas impression 'I want my (expletive deleted) money! Give me my (expletive deleted) money!'

Bart:

We just went to them and they voted the President back into office.

The President never said one word about cutting Social Security, instead he said quite the opposite. Had he done as you suggest, he wouldn't have been able to survive in Florida much less carry the state.

FL isn't the state you think it is anymore.

OJ,

You seem to think that every candidate you vote for supports every position of yours no matter how arcane, obscure and idiosyncratic. Despite my Superdome-sized ego, I, at least, have resigned myself to the notion that we will not be requiring Latin fluency for university admission any time soon, and that I must, regrettably, support candidates for office who take a contrary position.

Republicans have been getting attacked by Democrats for over a decade because they are perceived as weak on Social Security. The polling results in Florida and elsewhere indicate that the attacks, which were devastating to GOP candidates in the past, just ask Senator Thornburgh and Senator Dawkins, no longer work. The reason they no longer work is that the oldsters who are a larger percentage of the population than they were a decade ago, and especially affluent oldsters who are an even greater percentage of the electorate than they were a decade ago, believe the GOP will protect them every bit as much as the Democrats.

Please find me one, just one, quote from George W Bush where he advocates means testing Social Security. Nobody listens to slimeballs like Warren Rudman.

Only seniors have been promised that he won't touch how the program works for them and the younger have been promised "independence" from the program

"Social Security has been called the "third rail of American politics" -- the one you're not supposed to touch because it shocks you.

But, if you don't touch it, you can't fix it. And I intend to fix it.

To seniors in this country ... You earned your benefits, you made your plans, and President George W. Bush will keep the promise of Social Security ... no changes, no reductions, no way.

Our opponents will say otherwise. This is their last, parting ploy, and don't believe a word of it.

Now is the time for Republicans and Democrats to end the politics of fear and save Social Security, together.

For younger workers, we will give you the option -- your choice -- to put a part of your payroll taxes into sound, responsible investments.

This will mean a higher return on your money, and, over 30 or 40 years, a nest egg to help your retirement, or pass along to your children.

When this money is in your name, in your account, it's not just a program, it's your property.

Now is the time to give American workers security and independence that no politician can ever take away. "