[redahs]

Paying for Social Security using payroll taxes as we are currently doing seems like national suicidal, because younger families gain a greater share of their total income from working, rather than from holding land and investments.

Payroll taxes increase the effective tax burden on younger working families in their prime reproductive years, which means they can no longer afford to have the same number of kids, or to have kids as early. When younger workers are taxed, the less affordable it is to create new generations of younger workers, and fertility rates decrease.

The best thing the United States could do to address this would be to eliminate FICA \ self-employment taxes and fund social security out of a general income tax which taxed capital gains and dividends at the same rate as labor income. An even better solution would be fund it via a national real-estate property tax or national land value tax, and not to raise it from taxes on earnings at all, as Thomas Paine originally proposed in Agrarian Justice.

[snowwrestler]

Social Security is funded from payroll for the same reason 401k's are funded from payroll: because it is a retirement program that people invest in while working, and draw down when retired.

Now, I know and you probably know that it is actually run like a transfer program, where the payroll taxes from working people in 2018 are turned right around and sent out as checks to retired people in 2018.

But here's the thing: so are 401k's. The money you spend to buy investments in 2018 doesn't go into a vault; it is transferred to people who are selling investments... people like current retirees who are drawing down their 401k. And then when you're retired in 2048 (or whenever), and you're drawing down your 401k, you'll be getting your money transferred from people who are buying investments... people like younger workers building their nest egg.

Retirement programs are just collections of promises... that's all a financial asset is, a claim against future income. Social Security is a different kind of asset, but it still works fundamentally the same way; you pay into it while working, to create a claim against future payroll tax income when you're retired.