NCPA - National Center for Policy Analysis


February 3, 2005

President Bush is right when he says Social Security cheats blacks, according to Investor's Business Daily (IBD): The New Deal system favors whites, and blacks have the most to gain from privatizing the system.

Yes, African-Americans may get a larger share of their preretirement income each month from the system, which is designed to be progressive. But studies show the edge is erased, and in some cases even reversed, by differences in longevity. Blacks receive fewer payments due to their relatively shorter life span:

  • When a black man reaches age 65, he is expected to live only another 14 years; that is almost two years -- and 24 Social Security checks -- less than a white man.
  • The differences in life expectancies, along with marriage rates, result in a net income transfer through Social Security from blacks to whites of as much as $10,000 per person over a lifetime, the RAND Corp. has found.
  • What's more, regressive Social Security taxes crowd out other forms of savings and investment for blacks, many of whom live paycheck-to-paycheck and are unable to build real wealth.
  • Compared with whites, shockingly few minorities own stocks or bonds, even through mutual funds and pensions, Federal Reserve data show, and they rely almost exclusively on Uncle Sam for their nest eggs.

The wealth gap widens generation to generation because they cannot pass on their Social Security benefits to their heirs. According to the Cato Institute, one in three black men will pay into the system but die before collecting benefits. For them and their heirs, FICA is a poor man's death tax levied at 100 percent, says IBD.

Source: Editorial, "The Poor Man's Death Tax," Investor's Business Daily, February 3, 2005.


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