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FICA is not a tax. It is insurance. FICA stands for Federal InsuranceContribution Act.
Everyone should pay the same for the insurance. Paying a different amount for a product based on your income or color of your skin is morally wrong. ...
The REAL problem with FICA, of course, is that some on the left want to redefine it as a welfare benefit rather than an insurance product. Once they redefine it as a welfare benefit, they will want to means test it so that high income & net worth people won't be able to collect on the insurance they've dutifully paid premiums their entire life.
Sporty and Misty, as you wrote, originally Social Security retirement was conceived as primarily an insurance plan but due to medical advances and to an additional extent to Medicare, our population’s life expectancy is greater than it was in 1935 when the first Social Security act was passed. The enactment of the affordable care Act is expected to increase the extent of this trend.
Thus SS retirement benefits are of greater economic significance today than they were in 1935.
Social Security is now our most regressive tax that’s of particular hardship to our working poor and their families. It’s politically, economically unfeasible to increase their direct and indirect FICA taxes.
Employees now directly pay 7.65% and indirectly (due to through employers’ FICA imbedded within all prices), along with everyone else they pay the equivalent of somewhere between a 2% - 3% equivalent of a federal sales tax. Thus all employees, (including the working poor) pay approximately 10% - 11.6% for FICA.
[Refer to the first post of this thread for further explanation].
For 40% of retirees, their SS benefits are what enables them to stay above the poverty income levels. This is of significant financial benefit to retirees and their families. Additionally this is of net significant economic benefit to our nation.
Eliminating the Social Security retirement program or reducing its benefits without replacing it with something better would of course be financially detrimental to the elderly and their families; additionally it would be of net economic detriment to our nation.
Due to the retirement program’s economic benefit to our entire nation, it is not unreasonable that everyone (regardless of their income source) should contribute more to sustaining that benefit to our entire nation. The alternative is a greatly increased incidence of poverty in the USA.
[We should consider that deep wide spread poverty was the existing economic climate of every advanced nation (including the USA0 when FDR signed the first Social Security act. It’s ironic that conservatives hated FDR because he was “a traitor to his (financial) class and socialists hated him because the policies enacted by his “New Deal” denied them of the best opportunity they ever had to transform the USA to be a socialist nation. It seems characteristic of conservatives that they cannot take “yes” for an answer. They’re always striving to achieve what is to their own worst interest. If they could repeal Social Security retirement laws or undermine the program by “privatization or other means, the political consequences would be very much contrary to their vision of what our nation should be.
Beware of what you wish for, you may get it].
My mother in law does not collect Social Security. She worked for Clark County in NV for years, and due to their own benefits program she says they were exempt from FICA. I do not know how this works or worked, but I'll offer it as evidence that there are alternatives. I had grown up thinking there were none as well.
Prosopis, I sit corrected (before my keyboard). There are very limited conditions and circumstances where some alternative option exist.
Excerpted from the site https://turbotax.intuit.com/tax-tool.../INF19965.html .
“Most people can't avoid paying Social Security taxes on their employment and self-employment income. There are, however, exemptions available to specific groups of taxpayers.
Just like the income tax, most people can’t avoid paying Social Security taxes on their employment and self-employment income. There are, however, exemptions available to specific groups of taxpayers. If you fall under one of these categories, you can potentially save a significant amount of money. However, if you do take advantage of the exemption, you will be ineligible to receive any of the benefits offered by Social Security”.
Refer to this link for further details.
Respectfully, Supposn
Unless its on luxury items like yachts, a sales tax is the most regressive tax possible.
Sojj, the purpose of my proposal is to retain and/or improve Social Security retirement’s current benefits for all future wage earners at lesser than otherwise costs to them.
I’m a proponent of a proposal that is less regressive than our current methods of funding SS Medicare, SS retirement and disability insurance programs.
It has been said that politics is the art of negotiating what’s possible and feasible. Certainly compromises are required to achieve the negotiators’ goals.
There’s no advantage for a negotiator that rejecting out of hand any and all proposals that are (in the negotiator’s opinion not completely satisfactory, if the consequences leave the negotiator in a poorer position than otherwise.
I do not want the political consequences of our nation’s debate upon this issue to be of lesser than otherwise conditions for our nation’s wage earners.
... However, there is also a sort of mitigation of the regressivity of FICA taxes: Low wage earners receive a much higher percentage of their wages back in benefits than do high wage earners. I didn't see any mention of that in the OP, and I believe the OP is failing to consider the whole picture.
Escort Rider, the bottom line is that our current method of funding Medicare and Social Security retirement is both regressive and unsustainable.
It’s of little comfort to the working poor to recognize SS retirement and Medicare’s great benefit to them if within the present laws they cannot afford the price of sustaining those benefits and if they and the nation cannot afford the consequences of reducing those benefits.
We have to do something different to remedy the situation.
FICA is not a tax. It is insurance. FICA stands for Federal InsuranceContribution Act.
Everyone should pay the same for the insurance. Paying a different amount for a product based on your income or color of your skin is morally wrong.
.
, but I do think the employer match is flawed. The employee does NOT pay on gross wages, 401k employee deductions, Health Insurance employee premiums, FlexMed employee deductions all reduce gross wages to what eventually is known as SS Taxable Income. On that, they pay a combined 7.65% SS/Medicare. I have no issues with that, but the employer IMO should be paying on gross wages, before these deductions.
, but I do think the employer match is flawed. The employee does NOT pay on gross wages, 401k employee deductions, Health Insurance employee premiums, FlexMed employee deductions all reduce gross wages to what eventually is known as SS Taxable Income. On that, they pay a combined 7.65% SS/Medicare. I have no issues with that, but the employer IMO should be paying on gross wages, before these deductions.
401k deductions DO NOT reduce the SS taxable wages for employees and employers. In other words if you make 20K gross and put 10K into your 401k, both employee and employer pay combined 15.3% FICA on the full 20K. Only pretax medical (Sec. 125 plan) deductions reduce the amount SS/medicare is paid on. Last thing we need to encourage employers to get rid of medical benefits. The amount of lost FICA from Sec 125 exclusions is negligible and no reasonable person has every suggested removing that as a way to improve the finances of SSA.
401k deductions DO NOT reduce the SS taxable wages for employees and employers. In other words if you make 20K gross and put 10K into your 401k, both employee and employer pay combined 15.3% FICA on the full 20K. Only pretax medical (Sec. 125 plan) deductions reduce the amount SS/medicare is paid on. Last thing we need to encourage employers to get rid of medical benefits. The amount of lost FICA from Sec 125 exclusions is negligible and no reasonable person has every suggested removing that as a way to improve the finances of SSA.
I have known CFOs at multi billion US corps who were unaware employee Health Care premiums lower Employer FICA, so I do not think your fear is justified.
Prosopis, I sit corrected (before my keyboard). There are very limited conditions and circumstances where some alternative option exist.
Excerpted from the site https://turbotax.intuit.com/tax-tool.../INF19965.html .
“Most people can't avoid paying Social Security taxes on their employment and self-employment income. There are, however, exemptions available to specific groups of taxpayers.
Just like the income tax, most people can’t avoid paying Social Security taxes on their employment and self-employment income. There are, however, exemptions available to specific groups of taxpayers. If you fall under one of these categories, you can potentially save a significant amount of money. However, if you do take advantage of the exemption, you will be ineligible to receive any of the benefits offered by Social Security”.
Refer to this link for further details.
Respectfully, Supposn
I am self employed and don't pay in because I never show a profit.
, but I do think the employer match is flawed. The employee does NOT pay on gross wages, 401k employee deductions, Health Insurance employee premiums, FlexMed employee deductions all reduce gross wages to what eventually is known as SS Taxable Income. On that, they pay a combined 7.65% SS/Medicare. I have no issues with that, but the employer IMO should be paying on gross wages, before these deductions.
Bob TN, aside from early withdrawals of 401K funds, the named exemptions from FICA taxation you listed do not seem unreasonable or proportionally significant.
Deducted funds diverted to FlexMed are the similar to health insurance expenses; if the employees and their families don’t use the available services, their cost to the employee is no less income they have not received and could not spend.
I am self employed and don't pay in because I never show a profit.
Driller1, if you claim self-employment and your enterprise’s declared or undeclared gross revenues were of some substantial amount, I would suppose the IRS has or very soon will be continuing to examine and or audit your finances.
Respectfully, Supposn
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, but I do think the employer match is flawed. The employee does NOT pay on gross wages, 401k employee deductions, Health Insurance employee premiums, FlexMed employee deductions all reduce gross wages to what eventually is known as SS Taxable Income. On that, they pay a combined 7.65% SS/Medicare. I have no issues with that, but the employer IMO should be paying on gross wages, before these deductions.
