Back in seminary we were given the option to opt out of Social Security on religious grounds. The requirement was a religious objection for clergy to receive government aid. As you can guess, a few classmates did opt out on anything but religious grounds. Even then (mid 1970's) there was discussion that Social Security would not be there when we began to retire. These classmates felt that they would do better by contributing the same amount to investments managing those resources on their own. I have no idea whether or how they did. My guess is that at least some of them made no additional investments and will be in a real mess when they come to retirement as they will not be eligible to receive Social Security or Medicare. Others may have been disciplined about investing and have done quite well. We'll see how it plays out for them.
I remember the discussions very clearly. I remember arguing that beyond the question of whether or not it is moral to claim a religious exemption when one is really thinking only about the economics of the situation, there is the question of one's responsibility to the common good. I argued that it didn't matter whether or not SS would be there when I retired, it was my responsibility to pay in to support those who had given their lives building the society whose benefits I enjoyed. I still feel that way even though my quarterly payments of self-employment tax (the equivalent of the payroll tax) do hurt and the fact that I am more than frustrated by the most regressive tax in our system.
Those who benefit from the structures of the society should pay to support that system and those who benefit the most should pay proportionately more. I am not only willing to pay my part... I am morally obligated to do so and the size of my part is based on the benefits I receive and have received from the system.
This chart is a very important one for thinking about taxes... and about our current situation
A few observations -
I would argue that the wealthy and the corporations that do business in the United States receive the most benefits from the system and should proportionately pay more to sustain that system.
Taxes are the lowest percentage of GDP in 60 years... No wonder we're having a budget crisis.
Corporate taxes - in a time of HUGE profits to corporations - are the lowest they have been on the chart. We have all heard of huge corporations like Exxon in 2009 reporting a tax benefit of 1.1 million on 45.2 billion in profits. The GAO reported in '08 that from '98-'05, 2/3rds of US corporations paid no income tax.
Employment taxes - Social Security, Medicare, etc - are probably the largest percentage of the chart... and are the most regressive tax in our system, effecting the poor and middle class while not being levied on higher incomes.
Estate and gift taxes, the closest things we had (and I did say had) to a wealth tax, were never large but they did contribute to the fiscal pie, have shrunk to zero.
Clearly, this situation is not sustainable. The question is what should be done. The government does things that are necessary to have a civil society and those things cost money. They must be paid for and the only way to do that is via taxes. Somebody has to pay taxes and the lion's share are now being borne by workers through the payroll tax. In this situation, the Republicans and a few Democrats are arguing that we must extend tax cuts for the wealthiest 2% while cutting safety nets, social programs, and other expenditures that contribute to a civil society. This is exactly the wrong answer. Taxes should be raised on those who benefit the most.
The argument goes that raising taxes on the wealthy will cause them to invest less, resulting in fewer jobs, etc. This logic fails when you think about it. If money is invested, that removes it from the taxable income so logically, a higher tax rate encourages rather than discourages investment. Why give the money to the government when you can use it to add capital to a business and thereby avoid paying the taxes?