Income Redistribution From Social Security

by Fullerton, Don; MAST, BRENT D.

• ISBN13: 9780844771854
• ISBN10: 0844771856
• Format: Paperback
• Copyright: 2005-06-30
• Publisher: AMERICAN ENTERPRISE INSTITUTE PRESS

Summary

Social Security's benefit formula favors low-income recipents, so most people assume that the program redistributes income from rich to poor. However, many other factors affect the nature of income transfers through Social Security. This study examines these factors and critiques estimates of the progressivity of the program.

Author Biography

Don Fullerton is the Addison Baker Duncan Centennial Professor of Economics at the University of Texas-Austin Brent Mast is a statistician at the U.S. Department of Justice and a former research associate at the American Enterprise Institute

Table of Contents

List of Illustrations	p. vii
Acknowledgements	p. ix
Introduction	p. 1
The Social Security System	p. 5
Taxes	p. 5
Coverage	p. 5
Tax Rate	p. 5
Income Subject to Taxation	p. 7
Tax Incidence	p. 10
Income Taxes	p. 11
Benefits	p. 12
Retirement Age	p. 12
Eligibility	p. 13
Benefit Formula	p. 13
Distribution of Benefits	p. 14
Differences in Studies That Measure Redistribution	p. 17
Data	p. 17
Aggregate versus Microdata	p. 17
Data Sets in Micro Simulation Studies	p. 18
Measures of Redistribution	p. 19
Income Comparisons	p. 19
Absolute Redistribution Measures	p. 20
Relative Redistribution Measures	p. 20
Seven Factors That Affect Redistribution	p. 22
Differences in Mortality	p. 22
Mortality and Socioeconomic Status	p. 22
Mortality and Social Security Redistribution Studies	p. 28
Income Measures	p. 31
Aggregate versus Individual Income	p. 31
Annual versus Lifetime Income	p. 32
Covered Earnings versus Total Earnings	p. 33
Own Benefits versus Spouse and Survivor Benefits	p. 34
Individual versus Family Income	p. 35
Potential versus Actual Income	p. 35
Gross versus Net Income	p. 37
Cost of Living	p. 38
Social Security Taxes	p. 39
Coverage	p. 39
Tax Rates	p. 40
Amount of Income Subject to Taxation	p. 41
Discount Rate	p. 42
Retirement Age	p. 44
Age of Eligibility	p. 44
Retirement Trends	p. 44
Retirement and Socioeconomic Status	p. 47
Retirement and Social Security Policy	p. 49
Retirement Ages in Redistribution Studies	p. 50
Cohort Analyzed	p. 51
Coverage	p. 51
Net Benefits	p. 53
Social Security Policy, SES, and Progressivity	p. 54
Behavioral Effects	p. 56
Earnings	p. 57
Retirement Age	p. 58
Savings	p. 59
Resources Devoted to Obtaining Net Transfers	p. 60
General Equilibrium Effects	p. 61
Uncertainty	p. 62
Conclusions	p. 64
Notes	p. 67
References	p. 69
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