Financing Social Insurance

Harry Gunnison Brown

[Reprinted from the American Journal of Economics and Sociology,
Vol.4, No.4, July, 1945]

MUCH ATTENTION has been given recently in Great Britain and the United States to social insurance plans, and particularly to the Beveridge plan. These plans are intended to provide payments and services for workers "from the cradle to the grave," such as sickness insurance with medical care, unemployment insurance, old age annuities, etc. So enthused have the liberals become over such schemes that it would appear they consider insurance the solution of all social problems.

One aspect of the plans which is completely overlooked is how the services and payments are going to be paid for. What is proposed is that the expenses incident to providing such services be met by taxes that fall mostly on earned income. Insofar as the familiar payroll tax is used, it is important to note that, whatever the pretense that these are partly contributed by employers, their burden is altogether and with no significant qualification on employees' wages. And insofar as the necessary funds are drawn from general tax revenues, they come -- under the present tax system -- much more largely from earned than from unearned income. Thus the aid of relief extended to some workers tends to put extra burdens on other workers, and to bring the incomes of the latter nearer to -- or sometimes below-the level at which they, too, need relief.

I am not seeking here, to cast discredit on social insurance as such, any more than I seek to cast aspersions on the insurance of buildings against the hazard of fire. I am seeking to point out that these so-called "liberals" are enthusiastically trying to compel workers who, by working harder or more efficiently, are able to lift themselves economically a little above their fellows, to contribute of this excess toward the rest. They are ready and anxious to draw from the earnings of what men save and invest in the construction of capital to ameliorate the lot of the less fortunate. But to any proposal that a special tax burden be placed on the unearned incomes that men get from their ownership of the earth and from charging others for permission to use the earth, most of these liberals are altogether indifferent.