Why Rich People Prefer Cuts to Their Social Security Over Tax Increases

In an article on the richest one percent of families in the country, the NYT told readers that:

"they may prefer facing cuts to their own benefits like Social Security than paying more taxes."

The average income among the richest one percent is roughly $1.5 million. The maximum Social Security benefit for a retired couple is around $45,000. If we assume that the everyone in the one percent gets the maximum benefit (which would certainly be an overstatement of their benefits), then completely eliminating their Social Security would be equivalent to a 3 percentage point increase in their tax.

For families with higher incomes in the one percent, the potential loss due to a reduction in Social Security benefits would be an even smaller share of their income. For this reason, it is understandable that they would prefer to go the route of reduction in benefits to tax increases.

Wrong - The Rich Want to Be Taxed More
written by izzatzo, January 15, 2012 8:15 AM

For this reason, it is understandable that they would prefer to go the route of reduction in benefits to tax increases.

Any economist understands the Paradox of Satiation which is the real reason for more taxes - not benefit reductions.

At this level of income the marginal utility of an additional dollar is zero. Therefore tax increases are preferred over benefit reductions to achieve Compassionate Conservative Redistribution at zero marginal cost to society.

For example see scholarly works by Buffet and Gates Senior on this topic at the Philanthropic Patronage of Patriots for the Poor.

Stupid liberals.

The New York Times Company could do with a little beating
written by JHM, January 15, 2012 9:08 AM

for its English. Where I came from, "She prefers X than Y" would have been regarded a little peculiar.

As to the substance, the NYTC employee overlooks that even OnePercenters do not live by speadsheets alone.

Many of them (I think) want Ponzi Security Administration outlays reduced for reasons that have nothing to do with what they get themselves, or even with what they are robbed of in taxes -- above all, there is the fact that so much of it goes to such a deplorable sort of recipient.

Happy days.

Means Testing
written by Fred, January 15, 2012 9:31 AM

For a type of person who is philosophically opposed to Social Security a reduction in benefits based upon income turns the program into a means tested program It fundamentally changes it from a type of insurance for everyone into a type of welfare directed at a certain (poor) class of people.

Once Social Security becomes a means tested benefit that only poor people can receive it will be easily cut to ribbons or abolished entirely.

...
written by freebird, January 15, 2012 11:21 AM

The median income of the top 1% is considerably lower than the average of that group. I recall the threshold is something like 400k so the median is unlikely to be more than twice this level. Of course the few in the uppermost tier of the top 1% would gladly give up 100% of their social security benefits if the alternative is a 3% tax increase, but I doubt that the majority of the top 1% would like that trade.

Why Rich People Prefer Cuts to Their Social Security Over Tax Increases

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