Another Letter on Taxes

The Times-Dispatch Friday printed yet another letter on taxes, this one defending Barton Hinkle’s focus on income taxes alone as a measure of the overall progressivity of the tax code.

The argument offereed by Daniel Polk of Richmond as to why we shouldn’t look at the overall picture (including Social Security taxes) is a curious one: “If one applies the logic suggested by Williamson and Hollett, one could equate contributions to a pension plan as taxes.”

Um, no. The difference between Social Security and private pension plans is that Social Security is mandatory, and the benefits accrue not to individuals but to a large swath of the public.

Moreover, Polk’s letter seems to presume that Social Security and related taxes go into a separate account insulated from other federal receipts, and dedicated towards the payment of entitlements. That’s simply not the case.

There is an accounting device called the “Social Security Trust Fund,” but this is a convenient fiction; in practice the government spends social security taxes on immediate expenditures other than entitlements. (The Heritage Foundation has a good explanation of how this works; for a very different view on the supposed Social Security “crisis,” see this interview with economist Doug Orr.)

When total federal budget figures are published each year, all expenditures are compared with all receipts. It’s all of a piece.

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Published in: on December 23, 2006 at 1:53 pm  Leave a Comment  

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