If you hate taxes and want to sound like you aren’t just moaning and groaning, you’re experiencing “welfare loss of taxation.” In economics, welfare loss happens when things aren’t efficient. See: Deadweight Loss.
Oftentimes, the government tries to use taxes to correct market inefficiencies and make them efficient. But other times, they’re just collecting taxes, since that’s what governments do.
Welfare loss of taxation happens specifically when there’s that market inefficiency, resulting in a deadweight loss from a change in the tax rules. Thus, it’s also called deadweight loss of taxation (look at a graph of deadweight loss and you’ll see a little triangle that shows how much loss there really is, which depends on how far away from equilibrium the current outcome is).
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Finance: What is Social Security?11 Views
Finance Allah Shmoop What is Social Security Our people will
FDR Franklin Delano Roosevelt established Social Security in nineteen thirty
five as a reaction to seeing one too many old
people destitute dying and begging for Bitcoin on the streets
After you know the great stock market crash in depression
that followed were basically Social Security is welfare insurance So
that even the most modestly talented or worst savers for
retirement or worst financial victims of some scheme brought on
by you know them City slickers would have at least
enough money to eat and have a place to live
Other than you know under the freeway that's what Social
Security means meaning their social life is secured It was
supposed to be or at least well it started out
as a safety net this whole social security thing But
then it became the retirement vehicle that people ended up
relying on you know like a groupon for a free
hotel night where if you paid for five you've got
that sixth one free Almost makes staying an extra day
at Disneyland with kids Sound like a good idea Well
the act that established Social Security was also called always
D or o A S T I which stands for
old age survivors and disability insurance and notionally It was
funded by payroll taxes That is an additional tax It
was levied on everyone who saved up Hey check to
pay for their retirement right The government would take a
little slice out of your paycheck put it away and
then kind of give it back to you after investing
in decades later right And that would also pay for
the retirement of others not just you even deadbeats who
chose to not work and just live in Mom's basement
their whole life Yep In theory they would get Social
Security to Pika is the most commonly known thief of
cash from your paycheck and it stands for federal insurance
contributions Tax should be fi cat Well Social Security generally
worked for a long time anyway as this nation saw
the poverty rate go from somewhere in the forty ish
percent at its worst down to somewhere below ten ish
percent today depending on how you define poverty Well under
any definition however we don't have millions of people standing
on street corners of this country begging for food Many
of them aren't covered by Social Security but under the
same brother's keeper vibe We have soup kitchens now in
other places that those who failed to find financial security
along the way in society well you know can go
to eat It is nothing like the nineteen thirties in
America no matter what horror stories you hear So the
notion of being able to hang on to your social
status or even your material levels of wealth in your
old age was kind of a new thing back then
and in this FDR driven era knew was good Remember
New Deal new era New York New ton The fig
Yes they came out around this time as well Well
the structure of Social Security is pretty simple in concept
The individual pays in some amount each month called a
few hundred bucks in today's dollars and the government invest
that money for decades Eventually that money comps pounds away
to become a big number and the individual gets monthly
payments back to themselves after they reach a certain age
Well the payments then continue until the socially securitized is
here So the concept was simple and the key problem
it tried to solve was the undecided and wanton disregard
that so many Americans of the era had for their
future Many had come from a World War one mindset
where there may or may not have been a future
or they were feeling the effects of America emerging as
a super power and wealth And you know other good
things that came from those confluences of good fortune Well
basically Social Security was kind of positively forced savings It
was done so that even the worst offenders of non
saving Americans would have at least enough waiting for them
in their retirement So they could you know eat and
not live like this Well the key drivers financially however
didn't fulfill the original vision of the acts Promulgate er's
That is the government assumed a pretty high rate of
investment return And instead what happened is that a lot
of government entities hired government workers to invest that money
And well bottom line is they did a lot worse
than the very highly paid people on Wall Street Like
if you were a highly talented money manager who could
make today's dollars tens of millions of dollars a year
why would you become a government portfolio Manager and make
one hundred fifty grand Right talent wins That was one
reason that we have problems with soul security The investment
returns have been poor Thie Other reason Well the government
also assumed that people would continue to smoke which meant
that most would die at a young age like late
sixties early seventies and well in fact America kicked the
but for the most part and from an average life
span in nineteen fifty of about sixty seven or so
for an American male Well Americans today live in average
of eighty ish years depending on a whole bunch of
things but a whole lot longer than they did in
nineteen fifty when smoking was you know good for you
So if Social Security payments were supposed to compound at
ten percent as investments and they only compounded at well
six or seven percent well that was a big problem
After three or four decades of paying money into the
system instead of having say five hundred grand to retire
on well retirees only had three hundred grand And instead
of living just three years after the Social Security distributions
kicked in I'ii from eight sixty five on you know
when they would then start dying on Mass at sixty
eight issues so well Those three years of payout ended
up being some twenty or thirty years of payout today
and growing two thousand eighteen mark the first year that
the combination of cash collected from young people paying into
the system plus the growth of the invested money in
the system was less than money taken out of the
system by old people Translation We're starting tohave to fund
Social Security with current tax dollars from other sources or
set another way We're taking bridge and toll money for
people paying five bucks to drive over the bridge that
was supposed to go to repair the roads That money
is now coming out of that fund and going tio
this guy Or set another way If something doesn't change
soon like well you know people die sooner or young
people who are still working pay in a lot more
dough to the social security system The U S will
go bankrupt paying out these entitlements to retirees at some
point in the next decade or two Or three or
four Something like that Well the good news a bunch
of states like Illinois in California and a few others
Well they'll go bankrupt first and they'll test the court
system to see how these kind of bailouts work So
by the time the chickens come home to roost for
Social Security while the financial future of this country will 00:06:37.142 --> [endTime] be clear yeah clear as mud