I do taxes for undocumented aliens, and I can tell you it's not just social security taxes. When they file regular income taxes, they end up paying a higher effective rate, because they are not eligible for credits like the Earned Income Credit.
To be totally honest, I want our safety net -- transfers to people because of specific life circumstances (sickness, old age, unemployment, child rearing) -- to be financed with a VAT rather than wage taxes. I think that would be a little more progressive, but that is not my reason to prefer it. Rather it somewhat reduces the marginal cost of employing people and at least some of wages are saved whereas the VAT targets consumption. [Yes in general equilibrium it is complicated.] But some of the safety net deficit reduction will come from the non-affluent.
The tax system as a whole is made progress through the personal income tax (although that too, should have a savings over consumption bias) and perhaps a per capita rebate of some or all the revenue from the tax on net CO2 emissions.
A national abortion ban is unconstitutional on Federalism grounds. But maybe not with this Court. If the ACA would have been found unconstitutional except for Roberts calling it a tax, why would an abortion ban be ok? All powers not enumerated belong to the states, and all that, definitely not saved by the Commerce Clause.
"while there are a lot of problems with illegal immigration"
Why yes there are, starting with it being, you know, ILLEGAL.
"and good reasons to want to reduce it,"
REDUCE it? Shouldn't we be aiming to ELIMINATE it?
"illegal immigrants working with fraudulent documents are especially valuable to Social Security because their employers pay taxes into the system but the immigrants don’t collect benefits."
Is this as morally bankrupt as it sounds to me? Illegal immigration is good, aktshually, because then we can steal from the poor illegal immigrants? Geez!
'Illegal immigration' is a misdemeanor crime. Probably trillions of misdemeanors are committed every year in the US, 'eliminating' them is not a realistic goal. We're trying to run a country and balance multiple goals- maybe you're an ideologue on this issue, but reasonable people aren't
Some think that some illegal immigration should be legal, and that maximal enforcement against current illegal immigration would have considerable adverse consequences on the quality of life.
Is there any solution to what is becoming more and more of a gerontocratic Republican party obsessed with making the lives of younger people miserable?
Jeremy Horpedahl tweeted recently that in 1983 when the social secuity retirement age was last raised, 2/3rds of people opposed it but Congress did it anyway to make the system solvent for 30-40 years, which is now. I know Matt is all about popular positions and talking about things that he thinks making democrats win elections, but I'm worried that in the current political climate, we won't see the a similar unpopular but smart decision get made. Is this something that secret congress can do?
Either in this piece or another one last week Matt suggested exempting 65+ year old labor from income taxes, or at least greatly reducing them. To incentivize work without requiring it. Personally, I think more part-time work for the retired would be healthy both for them and for the economy
Then they should probably save money when they have their cognitive ability or use the money from selling their house and moving somewhere smaller. A top heavy population pyramid makes it harder for the people who are still working to subsidize those who aren't/can't anymore.
The burden, as I understand it, is that when you have 2 retired people for every 1 working person the work of society needs to be done by a smaller number of people. Those working need to “carry” those that are no longer working. Saving money doesn’t change that fact.
Think of it this way with current returns Norway’s sovereign wealth fund would be able to let everyone in Norway retire. Would that actually work barring a huge influx of immigrants? No, it wouldn’t. Having various slips of paper doesn’t change the fact that work needs to be done.
I don’t think Secret Congress can do a thing that will be heavily reported on afterwards. Because the heavy reporting afterwards is going to strongly associate the policy with the current president’s party, meaning that one of the two parties will rebel if the policy is either popular or unpopular.
Secret Congress is great for technical issues, like the ones listed in Matt’s first post on the topic:
The Every Student Succeeds Act, a major rewrite of federal K-12 policy
An overhaul of the Department of Veterans Affairs, spearheaded by Bernie Sanders and John McCain
The FAST Act, which authorized $305 billion over five years in infrastructure spending
A ban on incorporating plastic microbeads into health and beauty products
Then, during the Trump era, there was:
A ban on surprise billing
The Anti-Money Laundering Act of 2020, which created tougher standards for shell companies and cracked down on money laundering
A $35 billion investment in clean energy research and development, and a reduction in the use of hydrofluorocarbons, a potent greenhouse gas
I would tend to agree, which means I don't know how a solution to this happens. Brian Reidl on the Reason podcast claims that taxing the rich doesn't raise enough money to cover the costs of SS + Medicare. What's the path then to making this not be a debt bomb? Hope for drastic GDP gain from AI advancements?
Here's the thing about "tax the rich", or anybody else. The American people demand a certain level of publicly provided services. In a constitutional, democratic republic, elected officials either have to provide the services that the people demand in a constitutionally permissible way, or explain to the people why they can't have them and/or shouldn't want them. And they need to be honest about what those services are going to cost, and who's going to be taxed to pay for them.
NEITHER party has been willing to level with the American people on that since George H. W Bush and Bill Clinton. The Republicans have been worse, in my opinion, but both parties have just taken the easy way out, said "yes", and passed the bill on to our kids and grandkids. That has to stop.
Once you decide to be honest, you tax where the money is. Taxes are the dues we pay to live in the society we want. As long as the taxation is applied fairly and not confiscatorily, I for one am pretty agnostic as to level. We're pretty lightly taxed compared to most of the developed world. Deciding what we need, what we want, what we're willing to pay, and where those three things meet is something that regular people of good will and some comity should be able to work out for themselves. The Founders thought that we could, and so do I.
Matt writes: "illegal immigrants working with fraudulent documents are especially valuable to Social Security because their employers pay taxes into the system but the immigrants don’t collect benefits."
That's less than 1% of Social Security's annual payout. (Because although the about 8 million undocumenteds make up about 6% of the workforce, they make very low wages, thus pay low Social Security taxes.)
1% is a nice addition, but it's far from a game changer. Letting in more high-skilled immigrants would help a lot more.
I recently retired at age 55 so I have a lot of thoughts. First, there is a lot we could do to encourage people to save, and increase the amount they save. Making automatic enrollment mandatory on 401k plans would help. So would requiring companies to match contributions. A lot of the plans are rip-offs, charging ridiculous management fees and offering propietary products with crappy returns that pile on even more fees. Furthermore, education is lacking. Teaching people how if you put 5% of your income (with a 5% company match) into an S&P 500 index fund would pretty much guarantee you could retire early, enjoy it, pay for your long-term care, and leave money behind. Making seniors less dependent on social security would have massive benefits to everyone. Nobody ever seems to talk about this, but they sure push us to spend all of our paychecks on stuff.
I like your idea of putting Medicare into the ACA marketplace, but there would need to be a fundamental change on how the ACA subsidies work. I found it to be hokey and a bit unfair for people who are retired but do not yet qualify for Medicare. The subsidies are based on income, which makes sense for working people. If you are retired, your subsidies are then tied to how you are funding your living expenses because 401k/IRA withdrawls count as income. It's sometimes hard to estimate how much you will withdraw, making the enrollment tricky and causing you to do a true-up when you do your taxes. Rich non-working people living off of capital gains or post-tax savings can get more subsidies than people who have their savings in tax deferred accounts. Allowing early retirees to simply pay in to Medicare would be an easier approach.
I mean it's all well and good to pay a bit of attention to how the Republicans aspire to make America more Hobbesian but the San Francisco school board did some idiotic stuff with renaming schools and screwed around with algebra for a while so it behooves all of us to understand where the true threats to our country reside.
Definitely important to keep the far left out of power, but I don't think renaming schools is objectively worse than forcing old people to become homeless with no healthcare.
At crucial moments in life, I am convinced that all problems sort themselves into just two piles: Kill-Me-Today problems, and Kill-Me-Tomorrow problems. The Kill-Me-Today problems may seem too hard, or even boring and trivial, but here's the thing: we HAVE to solve the Kill-Me-Today problems, all of them, today, or we'll never get to the fascinating Kill-Me-Tomorrow problems, because we'll already be dead.
Our one and only Kill-Me-Today problem is the potential victory of authoritarianism, election denialism, insurrection, and "Christian" Nationalism less than eight months from now. I'm very concerned about the "Identity Trap", to borrow Yascha Mounk's term, into which elements of the Loony Left would love to drag the rest of us, and I'll be glad to take up the cudgels with you -- AFTER we save the Republic, and consign Trump, his accomplices, his facilitators, and his enablers to the oblivion that they have so richly earned, once and for all. Priorities!
>> They also resurrect a version of Ryan’s old plan to replace Medicare with a “premium support” program that would work like the Affordable Care Act.
Republicans actually tried this in New Hampshire and it was a disaster, maybe for a surprising reason.
The program lasted just one year, after which Republicans hastily reverted back to the old dedicated Medicaid system.
The problem was that the Medicaid population turned out to be much less healthy than the general ACA population and combining the Medicaid risk pool with the ACA risk pool caused insurance premiums to skyrocket for folks with ACA policies. This didn't matter so much for lower income ACA policyholders receiving subsidies, but it really killed higher income folks and many of them happened to be republican small business owners.
Reading about Republicans' desire for huge cuts to low income health care, I couldn't help but reflect on how good they are at keeping quiet about their unpopular ideas, the exact opposite of the Democrats. I mean, just imagine a bizarro universe where there was a large activist class of young Republicans who held tremendous sway at universities, legacy media, and prestigious institutions more generally. Any time someone on their side suggested easing up on proposed cuts to Medicaid, they screamed at that person and called them a Communist, socially and professionally shunning them. At the same time, Democrats focused heavily on advertising their support for things like affordable childcare and a living wage, while keeping any support for de-facto racial quotas, banning gasoline-powered vehicles and making it very difficult to purchase firearms on the DL.
The difference is the number of people who want say, Mediciad cut to ribbons or the ability to spill pollution into rivers are very small, but they're powerful, and know the politicians directly, so they can be assured the politicians are on their side.
OTOH, the people who want various things you think are unpopular or bad ideas are less connected to power and don't trust the poltiicians will pass what they want, so they have to be loud and pressure the Democrat's.
Also, the GOP has laid out these plans concretely before - but as the Obama team would tell you in 2012 when they showed people the Romney/Ryan plan, low-info voters literally didn't believe it was true.
There are lots of odious Republican activists out there but Democrats are terrible at playing offense and attacking, while Republicans and their noise machine is great at the game of politics (and terrible at governing).
Also, this. GOPers say plenty of crazy things, but even MSNBC is less partisan than FOX News, and there isn't a whole completely partisan left-wing interconnected heavily funded by rich people group of organizations with massive reach.
Like, I know progressives are a punching bad here. But, even folks like Hasan, Chapo Trap House, The Young Turks, Majority Report, and so on are basically all listener/viewer supported for the most part, while The Daily Wire has tens of millions of dollars of right-wing backing and that's just one group. That's not even getting into Prager U, and so on.
If instead of reactionary to fascist politics, those billionaires got behind spending hundreds of millions on Larry Hoganism or Charlie Bakerism, the GOP would be the LDP of America.
Vocal young educated Republicans who take serious policy stances actually are pretty repulsive to normal people— Blake Masters is pretty representative of the type— but there just aren’t many of them. (Smarter conservative-leaning young people tend to focus on just making money.) The downside for the Rs is that this deficit makes it much harder for them to construct policy and staff government with people who will advance their interests.
I appreciate the coverage of the boring stakes. However, those are also the things that are most likely to not happen due to political pressure and are relatively easy to undo if the public doesn't like them.
Trump has never been particularly loyal to any ideological viewpoint and any legislative agenda he isn't personally tied to (and even ones he is) seems likely to be something he reverses course on if people don't like it.
In contrast the effect he has on the integrity and general quality of the federal bureaucracy is something that can't just be repealed and is baked into Trump's management style. So while not unimportant I can't agree the boring stuff is the most important.
I do taxes for undocumented aliens, and I can tell you it's not just social security taxes. When they file regular income taxes, they end up paying a higher effective rate, because they are not eligible for credits like the Earned Income Credit.
To be totally honest, I want our safety net -- transfers to people because of specific life circumstances (sickness, old age, unemployment, child rearing) -- to be financed with a VAT rather than wage taxes. I think that would be a little more progressive, but that is not my reason to prefer it. Rather it somewhat reduces the marginal cost of employing people and at least some of wages are saved whereas the VAT targets consumption. [Yes in general equilibrium it is complicated.] But some of the safety net deficit reduction will come from the non-affluent.
The tax system as a whole is made progress through the personal income tax (although that too, should have a savings over consumption bias) and perhaps a per capita rebate of some or all the revenue from the tax on net CO2 emissions.
A national abortion ban is unconstitutional on Federalism grounds. But maybe not with this Court. If the ACA would have been found unconstitutional except for Roberts calling it a tax, why would an abortion ban be ok? All powers not enumerated belong to the states, and all that, definitely not saved by the Commerce Clause.
From Matt's footnote #1:
"while there are a lot of problems with illegal immigration"
Why yes there are, starting with it being, you know, ILLEGAL.
"and good reasons to want to reduce it,"
REDUCE it? Shouldn't we be aiming to ELIMINATE it?
"illegal immigrants working with fraudulent documents are especially valuable to Social Security because their employers pay taxes into the system but the immigrants don’t collect benefits."
Is this as morally bankrupt as it sounds to me? Illegal immigration is good, aktshually, because then we can steal from the poor illegal immigrants? Geez!
'Illegal immigration' is a misdemeanor crime. Probably trillions of misdemeanors are committed every year in the US, 'eliminating' them is not a realistic goal. We're trying to run a country and balance multiple goals- maybe you're an ideologue on this issue, but reasonable people aren't
Is exploiting them and stealing their tax money a misdemeanor?
And of course you then go straight to an ad hominem attack. Why am I not surprised.
Some think that some illegal immigration should be legal, and that maximal enforcement against current illegal immigration would have considerable adverse consequences on the quality of life.
Is there any solution to what is becoming more and more of a gerontocratic Republican party obsessed with making the lives of younger people miserable?
Jeremy Horpedahl tweeted recently that in 1983 when the social secuity retirement age was last raised, 2/3rds of people opposed it but Congress did it anyway to make the system solvent for 30-40 years, which is now. I know Matt is all about popular positions and talking about things that he thinks making democrats win elections, but I'm worried that in the current political climate, we won't see the a similar unpopular but smart decision get made. Is this something that secret congress can do?
https://twitter.com/jmhorp/status/1772369236041531513
I’m not sure it’s smart. A lot of 65 year olds have already lost a fair bit of physical and cognitive ability.
Either in this piece or another one last week Matt suggested exempting 65+ year old labor from income taxes, or at least greatly reducing them. To incentivize work without requiring it. Personally, I think more part-time work for the retired would be healthy both for them and for the economy
Then they should probably save money when they have their cognitive ability or use the money from selling their house and moving somewhere smaller. A top heavy population pyramid makes it harder for the people who are still working to subsidize those who aren't/can't anymore.
The burden, as I understand it, is that when you have 2 retired people for every 1 working person the work of society needs to be done by a smaller number of people. Those working need to “carry” those that are no longer working. Saving money doesn’t change that fact.
Think of it this way with current returns Norway’s sovereign wealth fund would be able to let everyone in Norway retire. Would that actually work barring a huge influx of immigrants? No, it wouldn’t. Having various slips of paper doesn’t change the fact that work needs to be done.
I don’t think Secret Congress can do a thing that will be heavily reported on afterwards. Because the heavy reporting afterwards is going to strongly associate the policy with the current president’s party, meaning that one of the two parties will rebel if the policy is either popular or unpopular.
Secret Congress is great for technical issues, like the ones listed in Matt’s first post on the topic:
The Every Student Succeeds Act, a major rewrite of federal K-12 policy
An overhaul of the Department of Veterans Affairs, spearheaded by Bernie Sanders and John McCain
The FAST Act, which authorized $305 billion over five years in infrastructure spending
A ban on incorporating plastic microbeads into health and beauty products
Then, during the Trump era, there was:
A ban on surprise billing
The Anti-Money Laundering Act of 2020, which created tougher standards for shell companies and cracked down on money laundering
A $35 billion investment in clean energy research and development, and a reduction in the use of hydrofluorocarbons, a potent greenhouse gas
Raising the age of tobacco purchase from 18 to 21
https://www.slowboring.com/p/the-rise-and-importance-of-secret
I would tend to agree, which means I don't know how a solution to this happens. Brian Reidl on the Reason podcast claims that taxing the rich doesn't raise enough money to cover the costs of SS + Medicare. What's the path then to making this not be a debt bomb? Hope for drastic GDP gain from AI advancements?
Donald Trump is objectively pro-inflation.
Here's the thing about "tax the rich", or anybody else. The American people demand a certain level of publicly provided services. In a constitutional, democratic republic, elected officials either have to provide the services that the people demand in a constitutionally permissible way, or explain to the people why they can't have them and/or shouldn't want them. And they need to be honest about what those services are going to cost, and who's going to be taxed to pay for them.
NEITHER party has been willing to level with the American people on that since George H. W Bush and Bill Clinton. The Republicans have been worse, in my opinion, but both parties have just taken the easy way out, said "yes", and passed the bill on to our kids and grandkids. That has to stop.
Once you decide to be honest, you tax where the money is. Taxes are the dues we pay to live in the society we want. As long as the taxation is applied fairly and not confiscatorily, I for one am pretty agnostic as to level. We're pretty lightly taxed compared to most of the developed world. Deciding what we need, what we want, what we're willing to pay, and where those three things meet is something that regular people of good will and some comity should be able to work out for themselves. The Founders thought that we could, and so do I.
Matt writes: "illegal immigrants working with fraudulent documents are especially valuable to Social Security because their employers pay taxes into the system but the immigrants don’t collect benefits."
True, but let's do a reality check. Social Security pays out about $1.4 trillion per year. Undocumented immigrants pay in about $13 billion into the fund annually (https://www.marketplace.org/2019/01/28/undocumented-immigrants-quietly-pay-billions-social-security-and-receive-no/)
That's less than 1% of Social Security's annual payout. (Because although the about 8 million undocumenteds make up about 6% of the workforce, they make very low wages, thus pay low Social Security taxes.)
1% is a nice addition, but it's far from a game changer. Letting in more high-skilled immigrants would help a lot more.
Thanks for the numbers!
I recently retired at age 55 so I have a lot of thoughts. First, there is a lot we could do to encourage people to save, and increase the amount they save. Making automatic enrollment mandatory on 401k plans would help. So would requiring companies to match contributions. A lot of the plans are rip-offs, charging ridiculous management fees and offering propietary products with crappy returns that pile on even more fees. Furthermore, education is lacking. Teaching people how if you put 5% of your income (with a 5% company match) into an S&P 500 index fund would pretty much guarantee you could retire early, enjoy it, pay for your long-term care, and leave money behind. Making seniors less dependent on social security would have massive benefits to everyone. Nobody ever seems to talk about this, but they sure push us to spend all of our paychecks on stuff.
I like your idea of putting Medicare into the ACA marketplace, but there would need to be a fundamental change on how the ACA subsidies work. I found it to be hokey and a bit unfair for people who are retired but do not yet qualify for Medicare. The subsidies are based on income, which makes sense for working people. If you are retired, your subsidies are then tied to how you are funding your living expenses because 401k/IRA withdrawls count as income. It's sometimes hard to estimate how much you will withdraw, making the enrollment tricky and causing you to do a true-up when you do your taxes. Rich non-working people living off of capital gains or post-tax savings can get more subsidies than people who have their savings in tax deferred accounts. Allowing early retirees to simply pay in to Medicare would be an easier approach.
I mean it's all well and good to pay a bit of attention to how the Republicans aspire to make America more Hobbesian but the San Francisco school board did some idiotic stuff with renaming schools and screwed around with algebra for a while so it behooves all of us to understand where the true threats to our country reside.
Definitely important to keep the far left out of power, but I don't think renaming schools is objectively worse than forcing old people to become homeless with no healthcare.
I'm encouraged by the green shoots of the recent San Francisco municipal elections. The far left took it on the chin.
At crucial moments in life, I am convinced that all problems sort themselves into just two piles: Kill-Me-Today problems, and Kill-Me-Tomorrow problems. The Kill-Me-Today problems may seem too hard, or even boring and trivial, but here's the thing: we HAVE to solve the Kill-Me-Today problems, all of them, today, or we'll never get to the fascinating Kill-Me-Tomorrow problems, because we'll already be dead.
Our one and only Kill-Me-Today problem is the potential victory of authoritarianism, election denialism, insurrection, and "Christian" Nationalism less than eight months from now. I'm very concerned about the "Identity Trap", to borrow Yascha Mounk's term, into which elements of the Loony Left would love to drag the rest of us, and I'll be glad to take up the cudgels with you -- AFTER we save the Republic, and consign Trump, his accomplices, his facilitators, and his enablers to the oblivion that they have so richly earned, once and for all. Priorities!
Raise capital, property and corporate taxes, lower SS for rich people - problem solved and 90% of the electorate wouldn’t be harmed.
>> They also resurrect a version of Ryan’s old plan to replace Medicare with a “premium support” program that would work like the Affordable Care Act.
Republicans actually tried this in New Hampshire and it was a disaster, maybe for a surprising reason.
The program lasted just one year, after which Republicans hastily reverted back to the old dedicated Medicaid system.
The problem was that the Medicaid population turned out to be much less healthy than the general ACA population and combining the Medicaid risk pool with the ACA risk pool caused insurance premiums to skyrocket for folks with ACA policies. This didn't matter so much for lower income ACA policyholders receiving subsidies, but it really killed higher income folks and many of them happened to be republican small business owners.
Reading about Republicans' desire for huge cuts to low income health care, I couldn't help but reflect on how good they are at keeping quiet about their unpopular ideas, the exact opposite of the Democrats. I mean, just imagine a bizarro universe where there was a large activist class of young Republicans who held tremendous sway at universities, legacy media, and prestigious institutions more generally. Any time someone on their side suggested easing up on proposed cuts to Medicaid, they screamed at that person and called them a Communist, socially and professionally shunning them. At the same time, Democrats focused heavily on advertising their support for things like affordable childcare and a living wage, while keeping any support for de-facto racial quotas, banning gasoline-powered vehicles and making it very difficult to purchase firearms on the DL.
The difference is the number of people who want say, Mediciad cut to ribbons or the ability to spill pollution into rivers are very small, but they're powerful, and know the politicians directly, so they can be assured the politicians are on their side.
OTOH, the people who want various things you think are unpopular or bad ideas are less connected to power and don't trust the poltiicians will pass what they want, so they have to be loud and pressure the Democrat's.
Also, the GOP has laid out these plans concretely before - but as the Obama team would tell you in 2012 when they showed people the Romney/Ryan plan, low-info voters literally didn't believe it was true.
There are lots of odious Republican activists out there but Democrats are terrible at playing offense and attacking, while Republicans and their noise machine is great at the game of politics (and terrible at governing).
Really? Let's compare Texas or Florida with California or Illinois
Also, this. GOPers say plenty of crazy things, but even MSNBC is less partisan than FOX News, and there isn't a whole completely partisan left-wing interconnected heavily funded by rich people group of organizations with massive reach.
Like, I know progressives are a punching bad here. But, even folks like Hasan, Chapo Trap House, The Young Turks, Majority Report, and so on are basically all listener/viewer supported for the most part, while The Daily Wire has tens of millions of dollars of right-wing backing and that's just one group. That's not even getting into Prager U, and so on.
If instead of reactionary to fascist politics, those billionaires got behind spending hundreds of millions on Larry Hoganism or Charlie Bakerism, the GOP would be the LDP of America.
Vocal young educated Republicans who take serious policy stances actually are pretty repulsive to normal people— Blake Masters is pretty representative of the type— but there just aren’t many of them. (Smarter conservative-leaning young people tend to focus on just making money.) The downside for the Rs is that this deficit makes it much harder for them to construct policy and staff government with people who will advance their interests.
I appreciate the coverage of the boring stakes. However, those are also the things that are most likely to not happen due to political pressure and are relatively easy to undo if the public doesn't like them.
Trump has never been particularly loyal to any ideological viewpoint and any legislative agenda he isn't personally tied to (and even ones he is) seems likely to be something he reverses course on if people don't like it.
In contrast the effect he has on the integrity and general quality of the federal bureaucracy is something that can't just be repealed and is baked into Trump's management style. So while not unimportant I can't agree the boring stuff is the most important.
Democrats shouLd absolutely campaign on letting the Ryan-Trump tax cuts for the well off expire TO REDUCE THE DEFICIT!