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Home Publications Blogs Beat the Press Should Bill Gates Be Able To Collect His Federal Flood Insurance?

Should Bill Gates Be Able To Collect His Federal Flood Insurance?

Friday, 05 November 2010 05:49

I have no idea if Bill Gates has any land where he may have taken out flood insurance that was provided by the federal government, but let's suppose that he did. If there was a flood, should he be able to collect on his insurance? After all, he certainly doesn't need the money.

This probably seems like a nutty question. After all, he paid for the insurance, why shouldn't he be able to collect on it like anyone else?

While that seems pretty straightforward, for some reason the same question apparently causes people great pain when applied to Social Security. Today Floyd Norris labors over the fact that rich people will collect Social Security benefits. Of course, they collect much less relative to what they paid in than poor people, so the structure of the program is progressive. But, they do get something back, so even Bill Gates and Warren Buffet will be able to pocket around $2,400 a month.

The reality is that the genuinely affluent get very little money from Social Security because they are few of these people. The discussion about cutting benefits for "affluent" retirees is aimed at people like school teachers and firefighters who may have had incomes in the range of $50,000 to $70,000. Such incomes don't fit the usual definition of "affluent," but folks use different logic when it comes to Social Security.

Comments (12)Add Comment
written by izzatzo, November 05, 2010 7:34
Milton Friedman collected his SS on the same grounds, while Dick Armey sues the government for forcing him to pay for Medicare.

In the USA, the rich pay the same marginal tax rate in low income brackets as the poor, yet receive the same benefits of government.

In some countries, speeding tickets are assessed on income which can result in fines that exceed a hundred thousand dollars for one ticket.

Let Mr Norris have his way. Start with the Pentagon and tax the rich in proportion to benefits received rather than relying on an average tax rate that cross subsidizes the rich by everyone else.
The undeserving rich
written by Scott ffolliott, November 05, 2010 7:42
In our plutonomy, the only safety net shall be to preserve the richest of the rich.
clash of the titans
written by frankenduf, November 05, 2010 8:08
if god flooded gates, gates would make crappy software that would make god's network periodically crash, and even god can't uncouple windows software from his own hardware- o waiddaminute...
Why am I paying for Hugh Hefner's Viagra?
written by Paul, November 05, 2010 10:40
Please explain why multi-millionaires get Medicare benefits? RepubliCONs should demand that the rich reject socialized medicine!
RE: Why am I paying for Hugh Hefner's Viagra?
written by tomm., November 05, 2010 12:15
Indeed. That taxpayers should be financing his geriatric sexcapades with the Playboy bunnies makes me stiffen with anger...
written by liberal, November 05, 2010 1:07
izzatzo wrote,

Start with the Pentagon and tax the rich in proportion to benefits received rather than relying on an average tax rate that cross subsidizes the rich by everyone else.

Actually, the best place to start is landowners, who receive 100% of land's unimproved value from someone else. Thus it can be taxed away completely with no harm to justice or efficiency.
Are you sure about this?
written by FS, November 05, 2010 1:45
You say "Of course, they collect much less relative to what they paid in than poor people".

Maybe you meant that they collect much less relative to their income? Contributions are based on the first $xx,000 of income.

Progressive Program
written by tew, November 05, 2010 1:47
Thank you for pointing out that the social security program is PROGRESSIVE. The lie that social security is "regressive" is told so often that some people believe it. Those who tell that lie choose to focus on the taxation, which is a flat tax with a cutoff. They ignore the fact that one receives a benefit in later life that is proportionally higher the LESS one paid in taxes during their lifetime.

I'm not rich, but I don't think there should be ANY means test at all for social security benefits. All that does is invite more fraud and intice people to spend more time, energy, and money trying to shift money around to game the system.

We all pay into social security as part of a contract that provides us all with a minimum income in old age - enough to avoid poverty. The program is there to prevent old age poverty, but some seem to think the program is there to ensure as many people as possible are on the edge of poverty. Means testing is nothing but a tax on savings which have already been taxed designed to ensure a higher number of people have only the bare basics in old age.
On Economic Rent, Taxes and Incentives
written by izzatzo, November 05, 2010 2:43
Economic rent extends way beyond land. For any supply curve for any resource, everything in the area above the curve, up to the market price, can qualify as economic rent, normally called producer surplus, while everything below the curve at the same price represents opportunity cost.

For example, the reason Baker repeatedly hammers the perverse incentives associated with copyrights and patents has little or nothing to do with land and everything to do with economic rent collected above a near zero cost of production and distribution.

As for matching progressive tax rates with economic rent, it's a safe bet, especially these days, that it's largely economic rent that is being collected rather than opportunity cost, putting the lie to claims that high marginal tax rates on the rich impede investment and productivity and in fact, enhance it instead with encouraged market entry by competitors who don't need the rent to enter the market.
written by PeonInChief, November 05, 2010 2:56
A long, long time ago, during one of the earlier "let's cut Social Security" rounds, someone (maybe Dean Baker, but I can't remember) pointed out that the cost of means-testing Social Security would far exceed the cost of just giving the rich old folks their Social Security.

But I guess we shouldn't be surprised, as we just had an election where people opposed to bailouts voted for candidates who opposed regulation that would protect us from having to bail the bankers out again.
What additional cost to "means test"?
written by AndrewDover, November 05, 2010 5:28
The IRS manages to tax social security income already: http://www.irs.gov/pub/irs-pdf/p915.pdf

You pay no taxes on SS income if your other income plus 50% of your SS income is $32,000 or less for married filing jointly.

Taxing vs. means testing
written by tew, November 07, 2010 1:35
AndrewDover asks "What additional cost to 'means test'?" and cites the current taxation rules on social security benefits. The burden of making these calculations falls on the individuals. Any auditing is done by the existing IRS systems (and those systems can automatically check your social security number with your reported benefits). So there's very little cost to the government to enforce this tax.

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.