Incentives matter and ultimately Governments incentivize certain types of lifestyles, tacitly rewarding those lifestyles. This is a long winded way of making me rethink the concept of means testing (as it relates to such entitlement programs as Social Security and Medicare, not Medicaid) and the extent to which it fails to achieve horizontal equity.
My father is keen on telling people that my brother and I represent a perfect balance: he saves everything, I spend everything. My brother is famously cheap; he squeezes every penny till it screams. And, alas, I am a spendthrift. Fast forward to retirement age, in all likelihood, my bro’ will have a much more secure retirement unless knight ridder decides to buy the blog (even then, my contributions have to rank in the bottom quarter with our resident master of the proverbial wet bag of shit-‘dingo), even assuming equal earnings.
Means testing typically looks at one’s means or revenue or income—however you want to call it—in the period when a person is receiving the benefits. As one gets older, or more specifically, when one retires, their income is no longer labor income but rather capital or asset income (i.e. interest and drawdowns from your 401 k or IRA). If you reduce one’s benefits (that they were taxed for in the first place), due to significant asset accumulation, while maintaining the benefits for someone with equivalent lifetime earnings, you are effectively taxing thrift. Capital income at the time of one’s retirement should not be the basis for benefits, but rather lifetime earnings.