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Redistribution in the Current U.S. Social Security System

Redistribution in the Current U.S. Social Security System

Chapter:
(p.11) 1 Redistribution in the Current U.S. Social Security System
Source:
The Distributional Aspects of Social Security and Social Security Reform
Author(s):
Jeffrey B. Liebman
Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226241890.003.0002

This chapter addresses the redistribution in the current Social Security system in the United States. Social Security increases tax revenue from workers each year and pays out benefits to retirees and other beneficiaries. The results on annual redistribution describe large annual transfers of resources among different demographic groups—transfers that depend mostly on the ratio of beneficiaries to earners within each group. Its progressive benefit formula is the fundamental source of intracohort redistribution from Social Security. Different definitions of income can lead to different interpretations of the strength of the relationship between income and the transfers from Social Security. Low-income individuals clearly receive a higher rate of return from Social Security than higher-income individuals. The income-based redistribution in the current Social Security system is fairly modest compared to the total benefits paid.

Keywords:   Social Security system, tax revenue, annual redistribution, annual transfers, intracohort redistribution, United States

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