June 17, 2010
CheckPoint: Social Insurance
Social insurance is used to fund public programs through many venues such as fees, fines, child support payments and licensing. Some of these programs these revenues are used to fund are Medicare, Medicaid, the WIC program, child welfare, disability and aging services. But most of the funding comes from taxes through federal and state governments.
There are three different classifications of how taxes are gathered; regressive, neutral or progressive, (Chambers and Wedel, p. 188). The regressive system taxes the people who earn less at a higher rate, the neutral or flat tax taxes everyone the same no matter what they earn, and the progressive system has higher taxes for the people who earn more. Regardless of which taxation system is being used, grants are used to distribute the funds to the programs and the States. There is a federal match that is determined for each program that varies with each state’s per capita income. The federal match ranges from 50 to 83 percent, (Chambers and Wedel, p. 192).
The benefits to this kind of funding and distribution are that every tax payer contributes to the programs the government funds. We all have to put in what via income tax, sales tax and property tax. There are also tax breaks for the lower income households, such as the Earned Income Credit. The downfall to funding programs through taxation is there are always going to be people that cheat the system by not reporting income, and that the system is very complicated and confusing.
The programs that receive this funding exhibit the pros and cons of this funding method when there is an economic downturn due to people paying less in taxes, and a general problem of continued funding even when the economy is fine. Also, budget cuts for state run programs such as Medicaid, result in federal cuts equal to or more than the state portion as well. But all of these programs are necessary and do help many of our...
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