The road to hell is paved with means-testing
One of the more disturbing facets of inequality in America is that of life itself. These days, the richer you are, the longer you live. This sad fact isn't just consequential for obvious reasons; it is eroding the progressive nature of America's largest welfare program, Social Security.
Social Security's benefits are calculated based on lifetime earnings. Income above $127,200 is not subject to payroll tax, thus limiting both taxation and benefits for the rich. But since the program pays out until death, the longer lifespan of the wealthy means they are collecting a significantly larger share of the benefits (which also holds for Medicare, the second-largest welfare program).
That is a problem for a number of reasons. But one proposed liberal solution — further means-testing Social Security to cut the rich out even more — is wrongheaded and indicative of a profound problem in conventional wisdom about taxes and spending. Social Security needs to be expanded, but cutting old rich people out of the program is the wrong way to do it.
In the basic fiscal framework of virtually all Democrats, Republicans, and especially "non-partisan" budget reporting, pre-tax income is treated as pre-political bedrock reality. Taxes, meanwhile, are regarded as an appropriation of what's earned before the government meddles. But in reality, the government is the only reason that income exists in the first place. Without the government institutions of property law, corporate law, securities law, labor law, laws which create the uniform United States currency, and so on, there would be no such thing as income. The mainstream ideology about pre-tax income is a priori impossible.
That means that Social Security, like all welfare programs, should be considered as part of the whole panoply of government policies which shape the distribution of income. A millionaire might not need a Social Security check every month — but rather than withholding the check, the government should just take the money back with progressive taxes.
That may sound like a roundabout way to arrive at the exact same place. But it's by far the safest route, because when it comes to American welfare broadly and Social Security specifically, there are very strong reasons to stop the means-testing and ensure everyone receives benefits.
First, universal programs are politically stronger. Inequality being what it is, an across-the-board increase in Social Security, paid for by axing the payroll tax cap, would be a net benefit for all but the top 5-10 percent or so. That means more beneficiaries who can raise a stink if and when neoliberals and/or conservatives propose slashing benefits so they can cut taxes on the rich.
Second, universal programs are better. Middle- and upper-middle-class beneficiaries can also complain when the program isn't working correctly, and they are much more likely to get an attentive hearing. They are also less complicated, because they don't require as much of a surveillance wing to adjudicate eligibility. Make a program part of the fundamental infrastructure of life for everyone, and it will generally be high-quality. As the transit nerds say, you can tell a public transit system is really good if it is used by rich and poor alike.
Finally, Social Security specifically could stand a large increase in benefits. The great 401(k) experiment was badly designed from the start and has been a catastrophic failure in its ostensible goals. A lot of people are nearing retirement with not remotely enough in their retirement accounts — Social Security is a perfect way to plug the gap.
This knee-jerk instinct towards means-testing is especially rotten because means-testing is likely responsible for a large part of the divergence in life expectancy in the first place. Its political weakness is what allowed Republicans and Democrats to destroy traditional welfare, leading to a 150 percent increase in extreme poverty. Medicaid is a lifesaver for the poor and near-poor, but it isn't nearly as good as Medicare — precisely because it's so miserly.
Universal benefits, paid for with progressive taxation, can give the poor and working class the same standard of care that the rich get — and go no small distance towards closing the gap in life expectancy.