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propose to examine the biggest phase of it, that which involves payments to the aged. |
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As an operational matter, the program known as old age and survivor's insurance (OASI) consists of a special tax imposed on payrolls, plus payments to persons who have reached a specified age, of amounts determined by the age at which payments begin, family status, and prior earning record. |
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As an analytical matter, OASI consists of three separable elements: |
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1. The requirement that a wide class of persons must purchase specified annuities, i.e., compulsory provision for old age. |
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2. The requirement that the annuity must be purchased from the government; i.e., nationalization of the provision of these annuities. |
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3. A scheme for redistributing income, insofar as the value of the annuities to which people are entitled when they enter the system is not equal to the taxes they will pay. |
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Clearly, there is no necessity for these elements to be combined. Each individual could be required to pay for his own annuity; the individual could be permitted to purchase an annuity from private firms; yet individuals could be required to purchase specified annuities. The government could go into the business of selling annuities without compelling individuals to buy specified annuities and require the business to be self-supporting. And clearly the government can and does engage in redistribution without using the device of annuities. |
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Let us therefore consider each of these elements in turn to see how far, if at all, each can be justified. It will facilitate our analysis, I believe, if we consider them in reverse order. |
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1. Income redistribution. The present OASI program involves two major kinds of redistribution; from some OASI beneficiaries to others; from the general taxpayer to OASI beneficiaries. |
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The first kind of redistribution is primarily from those who entered the system relatively young, to those who entered it at an advanced age. The latter are receiving, and will for some time be receiving, a greater amount as benefits than the taxes they paid could have purchased. Under present tax and benefit |
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