Tuesday, July 12, 2011
Social Security retirement benefits calculations already have some partial "means testing" with percentage tiers
Back on Feb, 15, 2011 Kevin Drum had authored an important factual article in Mother Jones, “Means Testing Social Security” in which he productively argues that means testing the rich would not save the federal budget very much money, but, more importantly, the benefit calculation is already somewhat means tested. He says that your benefit calculation comes from 90% of your first $749 in monthly earnings, 32% of the next $4517, and 15% above that – until you reach the annual cap on the FICA taxable amount. In other words, as we have said, the FICA tax cap does tend to make social security benefits behave somewhat like an annuity, but within the capped amount there are layers of progressivity which do not occur in private annuities with insurance companies, and which would probably go away if Social Security were “privatized” in “George W Bush” (or Cato) fashion.
Means testing could presumably be accomplished fairly quickly by eliminating the third and maybe even the second benefit levels for those with large incomes or assets. The Mother Jones article is here.
Readers may wish to check out a “Jonathan Swift” style satire in “Real Clear Markets” titled “Social Security Shutdown? Bring It On!”, link here. Yes, I can imagine the angry “arguments” against the undeserving.