The US taxes younger workers and gives their money to wealthier retirees \ stacker news ~charts_and

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The US taxes younger workers and gives their money to wealthier retirees manhattan.institute/article/the-overextended-retirement-state

3467 sats \ 16 comments \ @Scoresby 7h charts_and_numbers

This chart is from a Manhattan Institute paper called The Overextended Retirement State. The data for the chart is from the US Census Bureau Annual Social and Economic Supplements.

I was trying to think out the reasoning for why our tax system ended up like this. Supporting old people seems good. The data is from 2021, so I wonder if there's some kind of Covid distortion in there. On the other hand, if the average age of the first time mothers in the US is ~30, it seems like a bad idea to start taxing people the most right when they are trying to start a family in order to pay for old people's healthcare.

These two graphics show some data on how old folks are doing relative to younger people:

I read this as old people are somewhat doing better than the younger segments of the population.

I wonder if some of this is a consequence of creating a program (social security) that can't pay for itself so as demographics change and also as people live longer, a tax burden is placed on younger populations that nobody really thought through.

This last one shows how old people in all tax brackets receive a lot of support:

I wonder how we could do this better while still supporting old folks.

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116 sats \ 7 replies \ @SwapMarket 6h

Why does the state have to pay old people? It is their problem they did not plan for retirement and ended up with no money. Maybe I'm biased because no state will pay me.

22 sats \ 6 replies \ @Scoresby OP 6h

The original idea of social security of in the US was that people paid in and got their money back...(okay, I don't know if that was the original idea or not, but I can't imagine how else they sold it to everyone). So, it's kinda like they're supposed to give your money back.

But inflation and shitty politicians using the money for other things means it's just a wealth transfer and no one is really happy.

102 sats \ 1 reply \ @fauxfoe 6h

The original idea was forcing people to save for retirement, providing a risk-free program, and reducing the public problem of broke old people. It was a good solution in that a lot of people really don't have much of anything saved.

The reason to give older folks their social security is that it's the return on their investment from when they were younger. Not giving it to them would break the promise. And those payments are built into people's retirement plans. You want to not pay them out, then you gotta refund all the money they put in. With interest.

And we do, btw, claw it back from rich people. We tax social security benefits (something Trump wants to eliminate) and people with higher income get taxed at a higher rate. If you're rich, your retirement income is still high as you liquidate investments for living expenses, so you're paying high tax rates on that income. Perhaps you're also living in a high-tax state. That's even more clawback.

But the real reason not to change the program is that it just pays the elderly poor, it becomes a target, just like SNAP. All the lies and machinations designed to kill the social safety net will apply to social security. And pretty soon, we'll have a program that's been trimmed and trimmed and trimmed until it is only used by our poorest and least powerful. And then some asshole will kill it off entirely because preventing people from starving looks like "waste" to people with no empathy.

13 sats \ 0 replies \ @Scoresby OP 6h

Not giving it to them would break the promise.

the promise is kinda already broken, though, isn't it? I have to pay social security tax on my income, but who actually thinks it will be there in 20 or 30 years when I'm supposed to get it?

If they manage to have any dollars there it will be because they print them, which is really just taking it from me again.

At this point, I'd settle for them keeping all the money they've taken from me, not giving me any social security whatsoever, but not taking any more money from me, either.

17 sats \ 3 replies \ @SwapMarket 6h

We know it's a ponzi in every country now. Self investment in plans like 401k and IRA is a way to go.

0 sats \ 2 replies \ @Scoresby OP 6h

I often wonder about the likelihood of shotgun taxation for 401ks and IRAs. What exactly stops the gov't from deciding they are going to tax the gains on those funds when people try to pull them out? They seem to have no problem changing the age at which you can begin to withdraw without a penalty...

0 sats \ 1 reply \ @SwapMarket 6h

But they do tax the payouts, except Roth IRA. Pay-ins are pre-tax (except Roth). Age yes, they do change that. And marginal tax rates in the future can be higher than today.

0 sats \ 0 replies \ @Scoresby OP 6h

right, i was thinking of Roths.

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117 sats \ 0 replies \ @Solomonsatoshi 5h

If you remove all welfare for the elderly then it does provide a strong motivation for people to have and raise children who might take care of them in their old age....and to save for their own retirement.

New Zealand was the first country to introduce a (very modest pension) in the 1890s, apparently for guys who had come here to mine gold, never married and were now unable to work and had no family to care for them.

I do not think we can politically return to zero welfare, but means testing welfare does go some way to restoring market incentives and the potential for families to take more care of themselves rather than dependency on the state.

102 sats \ 4 replies \ @Solomonsatoshi 6h

I am curious to know how you all (especially Libertarians) would respond to the retirement benefit system here in New Zealand. At age 65 everyone is entitled to a state (taxpayer) funded pension of about NZD$500/week...there is no means testing. How many people would decline this welfare payment (you do need to apply for it) if they had sufficient wealth to not need it? My personal opinion, is that it should be means tested so that only those with minimal-moderate savings and wealth would get this welfare...wealthy people with millions of dollars in assets do not need it.

77 sats \ 3 replies \ @Scoresby OP 6h

I'm not steeped in libertarian theory as some here are, but my personal response is this:

means testing is kind of a trap. once you open the door to what is "enough," politicians can squeeze all kinds of other things along side it (surveillance, nudges one way or the other, choosing groups).

If you are gonna do something like guarantee each resident/citizen an income after a certain age, just do it for everyone.

102 sats \ 2 replies \ @Solomonsatoshi 6h

Yes, I think that was the general theory behind the original scheme which established this system we have, but it was established at a time (1970s) when the demographics were much different- there were far fewer older people and far more younger people in work to support the retirees. And yes not means testing does make it very simple to administer.

But as the demographics have changed since the 1970s the cost burden on younger people has become much heavier- I cannot blame younger generations for resenting the Boomers (of which I am one) for this seeming inequity.

While agreeing politicians will always meddle with these things like abatement rates and thresholds I just struggle with the idea that very very wealthy people in my country can claim a retirement welfare benefit that they do not need when younger people are paying taxes for that benefit and often cannot access other welfare or government services because of lack of funds.

The current expense of the pension is greater than all other welfare paid in NZ, and it is increasingly rapidly as the population ages.

14 sats \ 1 reply \ @Scoresby OP 5h

The current expense of the pension is greater than all other welfare paid in NZ, and it is increasingly rapidly as the population ages.

This is such a big problem. I don't think any politician will have the guts to make a hard call, so it will be hide it, hide it, as everything slowly degrades.

0 sats \ 0 replies \ @Solomonsatoshi 5h

Several politicians have tried here in New Zealand but there is huge incentive for politicians to play on peoples short sighted greed and selfishness and cancel longer term solutions when governments changes that has happened repeatedly here in NZ over the last 50 plus years. The original universal pension was introduced by a populist politician who scrapped a program (similar to your 501 scheme I believe) which would have given everyone a retirement fund built up over their working life. Many times since any attempt to change the system to something more sustainable has been reversed by populist backlash and revisions.

0 sats \ 0 replies \ @Undisciplined 4h

I wonder if some of this is a consequence of creating a program (social security) that can't pay for itself so as demographics change and also as people live longer, a tax burden is placed on younger populations that nobody really thought through.

100%. Even in my very mainstream macro courses, the instructor described social security as a straight up Ponzi scheme. Essentially, they never expected birth rates to collapse and can't survive that for long.

This happened, I'm pretty sure, because Boomers have always been the largest voting cohort and people vote themselves free stuff.

I wonder how we could do this better while still supporting old folks

One idea I have is something analogous to child support, but for old people. Basically, before the state starts paying for an old person's care, their family has to pay for it. Boomers are fairly shameless, but even they might have some reservations about blatantly looting their kids and grandkids.

0 sats \ 0 replies \ @denlillaapan 5h

yup, that is the structure of a PAYG pension system: shaft the next gen