Jeff Bezos tweeted:

Yes, the United States has the most progressive tax system in the world. The top 1% pay 40% of taxes, the bottom 50% pay 3% of taxes. We can make it even more progressive by zeroing out taxes on the bottom half. It’s a small amount of the total tax revenue but very meaningful to people in this group.

Strangely, a chorus of liberal economists rushed to attack Bezos. Gabriel Zucman replied:

Contrary to what you claim, working-class people contribute significantly to funding American society today. Payroll taxes and consumption taxes absorb a high fraction of their income.

Justin Wolfers piled on:

If you only count the progressive taxes the U.S. levies, then the U.S. system is quite progressive. But if you also count regressive taxes (payroll taxes, sales taxes, etc), it’s not very progressive.

Bezos called for cutting taxes on the bottom half to make the tax system more progressive and the redistributionists came out swinging–to argue he was wrong about how progressive the current system already is. Own goal. Heretics are worse than unbelievers.

But there’s a second, more interesting thing going on. To make the regressivity case, Zucman and Wolfers have to count payroll payments as taxes. That cuts directly against eighty years of liberal doctrine. Beginning with FDR, the argument on the liberal side has always been that payroll taxes are not taxes but contributions or premiums entitling the payer to benefits as an “earned right.” Here’s FDR to Luther Gulick in 1941:

We put those payroll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.

That framing isn’t a historical curiosity. It runs straight through liberal social security stalwarts like Arthur Altmeyer, Wilbur Cohen, and Robert Ball, and it’s alive today in Nancy Altman and Eric Kingson’s Social Security Works!, which attacks billionaires and insists Social Security benefits are “earned compensation.” The whole political durability of the program–the third rail–rests on this framing.

So the modern left wants it both ways. When the question is whether to cut Social Security, FICA is a premium and benefits are earned compensation. When the question is whether the tax system is progressive, FICA is suddenly a regressive tax. Pick a lane.

Is there a principled way to resolve this? Yes, and it follows Jim Buchanan (see my earlier post here) and Larry Summers who laid out the economics in his classic paper Some Simple Economics of Mandated Benefits. The principled test is whether a payment reduces labor supply. The wedge between marginal product and the worker’s reservation wage isn’t the statutory rate–it’s the gap between the mandated payment and the worker’s marginal benefit. Sylvain Catherine made exactly this point in reply to Wolfers:

Payroll taxes are not regressive! They are mandatory contributions to a retirement system that offers higher rates of returns at the bottom than at the top.

Consider a forced savings program: everyone must pay 12.4% of income into a 401(k). Is this a tax? For someone who was going to save 15% anyway, not at all. For someone who was going to save 10%, only the extra 2.4% bites. Mandatory does not mean tax. The marginal valuation of the mandated benefit is the key.

Now apply this to the two payroll taxes.

Medicare (HI): Every marginal dollar buys zero marginal benefit. Thus, it’s a tax. Part A eligibility is binary–40 quarters gets you in–and once in, your benefit is whatever Medicare spends on your care. No relationship on the margin. (Moreover, the raw HI schedule is unambiguously progressive: 2.9% flat, rising to 3.8% above $200K/$250K thresholds, plus the NIIT.)

Social Security (OASDI): The 90/32/15 Primary Insurance Amount bend points mean a low earner gets a much better return than a high earner. So the gross statutory rate is flat-then-regressive; but the net rate is progressive. In short, OASDI isn’t a tax for low earners but it is a tax for higher earners, thus the tax is progressive.

So: HI is a progressive tax. OASDI is a contribution at the bottom and a tax at the top. Either way, the Zucman-Wolfers framing—payroll payments as straightforward regressive taxes—is wrong and rhetorically it abandons the framing the left has spent eighty years building to protect these programs.

Personally, I’d prefer a system truer to the old rhetoric–a forced savings program with a closer connection between marginal payments and benefits. But if the left wants to reframe Social Security contributions as taxes, and thus make Social Security all about redistribution to the poor, rather than a wise savings program, roll the dice. Just remember that Altmeyer, Cohen, and Ball spent decades building the “earned right” framing precisely because they understood it was the program’s structural defense against means-testing and privatization. Drop the framing and you drop the defense. I suspect the privatizers at AEI and Cato will happily take that trade but the left may come to regret making it for them.