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Means testing as against general taxation… more thoughts from the US June 29, 2011

Posted by WorldbyStorm in Economy, Irish Politics.
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Good discussion on the ever useful To The Point podcast on KCRW about pensions in the United States. As with this state and neighboring ones the debate is about funding. In a piece on the AARP [American Association of Retired Persons] some useful nuggets were thrown up. Roger Hickey of the left leaning Campaign for America’s Future was one of those participating in the program. In response to the points made by a representative of The Third Way, a supposed Democratic think tank calls for means testing he offered the following thoughts.

Warren Olney:

What do you say to a means test [for social security]…my understanding is that when social security was originally proposed it was said that unless everybody got benefits everybody wouldn’t want to contribute…

Roger Hickey:

Yes, and it’s a progressive benefit, people on the lower rungs get better benefits relative to what they put in.

WO: Does a means test make sense to you?

RH: Well, you know means testing is a beauracratic way to examine everybody’s income. The tax system does that already…and so, if you simply lift the cap rich people would be paying more for their benefit. That’s a form of means testing but it’s not one that’s going to dip down and grab the middle class people who are really dependent on social security. And when you talk about means testing you’re inevitably talking about cutting middle class benefit and that’s a non starter for politicians who want to stay in office. The middle class depends on social security and if they get a sense that you’re turning it into a welfare program for just the very poor then you’ve lost the solidarity inherent in social security when it was devised.

There are two arguments encapsulated in Hickey’s response above, firstly a pragmatic one and secondly what can be seen as an ethical one – or perhaps from a left position an ideological one. I think that on the left it is the second argument that is most often brought to bear, and rightly so, it’s far from incorrect.

There are other arguments as well in favour of universal provision supported by general taxation, as noted previously on this site numerous times, that the social outcomes are vastly superior to means testing. But that’s a difficult enough area to position a defense because to be honest far too many aren’t particularly concerned, other than in a rather nebulous way, with social outcomes, and some are actively hostile to such outcomes.

It’s the first argument that Hickey makes, the one based in pragmatism which I think is so important. The tax system already provides a mechanism for examining income. Why on earth need we bother with duplication or triplication of same through means testing various services and provision?

It’s an egregious waste of resources in a context where we’re told on a continual basis that we must seek greater efficiency. I don’t want to address the reasons why some believe means testing is preferable for fear of being accused of projecting onto the motivations of others, but one might look at the unhappy history of those who are beyond the PAYE tax net for perhaps some clues as to why there is such a push to

I was having this discussion with a friend recently who, coincidentally enough, was arguing that some pensioners appeared to be a privileged group in the current climate given that they’d seen fewer impacts on their income. His line of argument was that means testing them would weed out the wealthier.

Now, there’s many responses to such a point, not least that the returns on such means testing would be relatively minor in terms of addressing our fiscal crisis and perhaps that pointing at one group, pensioners, or those on welfare, or whatever is to miss the bigger picture that the crisis is unamenable to solution through such measures.

But taking it on its own terms I suggested that taxation would be the obvious way forward and the response was why should the government give money only to take it back? But of course one can see the dynamic in two ways. One could see it as the taxpayer giving money to the state in the form of taxes and then some being given back to the taxpayer. And given that we have a functioning and functional tax system, at least for those who are within the PAYE net, why bother imposing another level of control through means testing?

That really is the question that needs to be asked, because that’s when the secondary and tertiary benefits of universal provision supported by general taxation alluded to above then come into play.

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Comments»

1. Education and the Sunday Business Post… « The Cedar Lounge Revolution - October 13, 2011

[...] to engage with those in such a position. It’s called the income tax system, which as was noted here in the US context, is all but universal and certainly sufficiently flexible to ensure that those who ‘benefit [...]

2. Means testing… « The Cedar Lounge Revolution - December 13, 2012

[...] distortions (particularly for those who fall above or below certain limits of income), that we already have a society wide means of assessing (albeit with some omissions) wealth in the form of…and that in certain areas it can provide an obstacle to access – as with [...]


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