Paul Krugman tries to define the terms of debate on tax reform:
With taxes on the wealthy on the political radar, we’re going to drowning in a vast wave of double-talk and smothered by vast amounts of fuzzy math. Still, one has to try. So, a couple of notes.
One is that you have to beware of the old trick of saying “taxes”, then slipping into “income taxes”. Most Americans pay more payroll than income taxes, but the reverse is true at high incomes. So focusing only on income taxes makes it seem as if the rich pay much more of the burden than they really do.
Well, the question of how to think about Social Security and Medicare is vexatious. In other venues, and for decades, advocates of Social Security have promoted it as an "earned benefit". Here, for example, is Bernie Sanders writing last week in favor of higher Social Security taxes:
It is the one earned benefit program upon which they [older Americans] can depend. They know that they have paid into Social Security and they have earned the benefits due them by our government.
Well, fine. If it is an earned benefit then we can mimic the activity of the Social Security actuaries and track a person's dollars in with the eventual dollars taken out. And the upshot? Social Security tends to be somewhat re-distributive, favoring lower lifetime earners over hgher ones. Krugman himself made this point when it helped him bash Bush:
...the formula determining Social Security benefits is progressive: it provides more benefits, as a percentage of earnings, to low-income workers than to high-income workers.
And Medicare is clearly tilted towards lower earners, since everyone gets the same benefit regardless of their contribution.
So - in assessing the tax burden faced by Americans one might reasonably ignore both Social Security taxes and benefits, figuring that on net, the program favors lower earners.
But that would be tricksie! Becasue when the burden of taxes is the topic, Krugman et al prefer to pretend that Social Security is just one more "pay as you go" government program. In this formulation Social Security's current costs and eventual benefits have no more link than the connection between a person's income taxes paid and their benefit from the national defense budget.
Hmm. As a political calculation, the marketing appeal of the "earned benefit" approach is obvious. Still, I am not sure why progressives think we should be taxing working class laborers so that well-off retirees can cavort in Miami. Just why are Social Security benefits higher for formerly high-earning retirees with ample retirement savings? Surely Social Security and Medicare should be means-tested if they are just "pay-go" transfer schemes intended to lift the elderly out of poverty? I don't notice Warren Buffett clamoring to have his Social Security benefit knocked down to zero and his Medicare beneift suspended, but that would be a logical policy for him to advocate if he wanted to save Social Security. (Soc Sec benefits are taxable, but that puts the receipts in the general fund; means-testing the beneift would keep the money in the Soc Sec Administration budget.)
If Democrats want to step forward in favor of means-testing the Social Security benefit then I will take them seriously that it is a pay-go scheme. If they want to hide behind the "earned benefit" marketing pitch, then they should man up and drop it from their tax burden calculations.
SOMEBODY CALL 9-9-9: Since you asked, I would be fine with scrapping the (regressive) payroll tax and replacing it with a (regressive) national sales tax, or VAT, or some such tax on consumption rather than work. But Roosevelt's acolytes on the left will never agree.