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Old 03-27-2014, 11:29 AM
 
1,026 posts, read 559,196 times
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FICA payroll tax; our most regressive tax.
Shifting a portion of FICA payroll tax to a federal sales tax.

Medicare is available to almost all of USA’s elderly and Social security retirement is available to almost all of USA’s elderly that were employed in the USA. No one can foretell their financial future condition with certainty. It’s not unusual for even wealthy persons have found themselves in need of Social Security or Medicare in their old age.

Poverty is directly detrimental to those families lacking minimal incomes but additionally it is detrimental to our entire economy. FICA is the most regressive of all federal taxes. It is proportionally greatest harm upon our working poor.

Except for work related injury) there’s no logical relationship between prior employment and medical need.
I advocate that FICA's portion of revenue earmarked for Medicare be entirely, and half of the social security retirement’s portions of FICA be replaced with a general sales tax.

FICA does not at present fully sustain these social programs, it is our most regressive federal tax and this shift of revenue sources is preferable to the reduction of Medicare or Social Security’s retirement benefits.

Employees generally cannot themselves entirely fund their own lifetime annuity program and employers FICA contributions based upon their payrolls are punishing employers for providing payrolls. I’m opposed to entirely disconnecting the relationship between payroll taxes and social security retirement benefits and I’m opposed to increasing the retirement age. Although people are living longer, most people’ are physically unable to sustain the production rates they achieved in their prime working years. Some compromises are called for.

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FICA payroll tax; our most regressive tax.
Addendum: At present, employers’ portions of FICA payroll taxes are imbedded within the prices of all goods and services and passed on their customers. We all pay those employer costs.

Shifting a portion of FICA payroll tax to a federal sales tax.

Each employees’ and employers’ FICA tax would be reduced by 4.65%.
[Medicare’s 0.0145) + (Social Security’s 0.0325) = 4.65%
The 9.1% of payroll that’s reduced from total FICA revenues would be replaced by a 4.65% general sales tax.
The increase of prices due to eliminating 9.1% of USA’s payrolls from FICA’s revenues and enacting a 4.65% sales tax is dependent upon the proportional relationship of payroll subject to FICA and the sales transactions subject to a sales tax.
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If USA’s sales revenues subject to the sales tax are twice our total payrolls subject to FICA, the gross price increases would actually be:
(0.0465)(1/2)[1/1.0465)] > (0.02325)(0.9555) > .0222
the approximate gross price increases would be 2%
and for the working poor a net tax decrease of over 2.5 % .

If USA’s sales revenues subject to the sales tax are triple our total payrolls subject to FICA, the net price increases would actually be:
(0.0465)(1 - 1/3)[1/1.0465)] > (0.031) (0.9555) > .0296
the approximate gross price increases would be less than 3%
and for the working poor a net tax decrease of over 1.5 % .

Respectfully, Supposn
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Old 03-28-2014, 06:28 AM
 
Location: Forests of Maine
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If you like what FICA does for you, then enroll and pay into it.

Otherwise, you know your options.
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Old 03-28-2014, 08:23 AM
 
Location: Paranoid State
12,685 posts, read 9,425,981 times
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FICA is not a tax. It is insurance. FICA stands for Federal Insurance Contribution 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.

Imagine, for example, going to the grocery store to buy a gallon of milk. You get to the checkout line, and there is one person in front of you. She, also, is buying a gallon of milk. The clerk charges her, say, $3.00 and she pays & leaves. The clerk rings up your gallon of milk, and says, "That will be $5.58" What??? This is the same SKU as the woman who just was charged $3.00. "Yeah -- but you make more money than she does, so it's only fair to charge you more for the same product, because you can afford it."

People would go postal.

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.
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Old 03-28-2014, 08:36 AM
 
1,026 posts, read 559,196 times
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Quote:
Originally Posted by Submariner View Post
If you like what FICA does for you, then enroll and pay into it.

Otherwise, you know your options.
Submariner, employers are required by law to withhold 7.65% from each employee’s earnings. Commencing 2014 the withholding for Social Security and Medicare will be capped at $17,000 per year. The FICA tax for Medicare at a rate of 1.45% will continue to be withheld from each employee’s earnings that exceed $17,000 each year.

Employers are required to match their employees' total taxes for FICA. Commencing 2013,in addition to matching their employees withheld FICA taxes, employers have been required to pay an additional 0.9% if their payrolls for FICA’s Medicare funding.

There are no alternate options to these requirements.

Respectfully, Supposn
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Old 03-28-2014, 08:41 AM
 
508 posts, read 527,341 times
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Quote:
Originally Posted by Supposn View Post
FICA payroll tax; our most regressive tax.
Shifting a portion of FICA payroll tax to a federal sales tax.
And you think a sales tax is LESS regressive???

Unless its on luxury items like yachts, a sales tax is the most regressive tax possible.
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Old 03-28-2014, 09:34 AM
 
Location: Forests of Maine
29,722 posts, read 47,495,927 times
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Quote:
Originally Posted by Supposn View Post
Submariner, employers are required by law to withhold 7.65% from each employee’s earnings. Commencing 2014 the withholding for Social Security and Medicare will be capped at $17,000 per year. The FICA tax for Medicare at a rate of 1.45% will continue to be withheld from each employee’s earnings that exceed $17,000 each year.

Employers are required to match their employees' total taxes for FICA. Commencing 2013,in addition to matching their employees withheld FICA taxes, employers have been required to pay an additional 0.9% if their payrolls for FICA’s Medicare funding.

There are no alternate options to these requirements.

Respectfully, Supposn
I have worked alongside a number of others who did not have SS policies. Our employer did not pay into any SS policy for those workers.

Some of those workers were born and raised in areas of US territory where it has simply never became popular to enroll their children at birth. They are US citizens but in their culture it has never been seen as needed. As adults they had never had a policy. Also some of my fellow workers were US citizens who had previously revoked their SS policies.

Among my many duties, one was to assist fellow workers in filing paperwork with the SSA. In that role I have assisted US Citizens in revoking their SS policies. Which stopped their earnings from going into said policy.
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Old 03-28-2014, 10:26 AM
 
Location: Los Angeles area
14,022 posts, read 16,943,481 times
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Default Discussion of regressivity in taxation

Quote:
Originally Posted by Sojj View Post
And you think a sales tax is LESS regressive???

Unless its on luxury items like yachts, a sales tax is the most regressive tax possible.
I agree that the OP's suggestion is rather weird because it would substitute one regressive tax for another. Of course there are ways to mitigate the regressivity of sales taxes and the most common one is to exempt food, as is done in California. The poorest of the poor still have to purchase food - they have no choice. Various states have various schemes along those lines, but the sales tax still remains rather regressive.

FICA taxes may be even more regressive than sales taxes because of the limitation of applying those taxes only to salaries less than about $115,000 per year. (I don't remember the exact amount and I'm too lazy to look it up; it normally goes up a little each year). The justification is that Social Security benefits are also capped at that level.

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.
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Old 03-28-2014, 11:45 AM
 
1,152 posts, read 957,930 times
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Quote:
Originally Posted by Supposn View Post
Submariner, employers are required by law to withhold 7.65% from each employee’s earnings. Commencing 2014 the withholding for Social Security and Medicare will be capped at $17,000 per year. The FICA tax for Medicare at a rate of 1.45% will continue to be withheld from each employee’s earnings that exceed $17,000 each year.

Employers are required to match their employees' total taxes for FICA. Commencing 2013,in addition to matching their employees withheld FICA taxes, employers have been required to pay an additional 0.9% if their payrolls for FICA’s Medicare funding.

There are no alternate options to these requirements.

Respectfully, Supposn
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.
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Old 03-28-2014, 11:58 AM
 
Location: Los Angeles area
14,022 posts, read 16,943,481 times
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Quote:
Originally Posted by prosopis View Post
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.
What you are describing is fairly common for public sector workers. California public school teachers (statewide) do not fall under Social Security. Whether that alternative is better, worse, or about the same as Social Security depends on the details of the particular pension system you are talking about, and they vary quite a bit. In my case (high school teacher in Calif. for 34 years) I had 8% withheld from my salary as my contribution to the pension. So my "tax" was higher than the FICA tax, but on the other hand my pension is also better. I am not complaining.
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Old 03-28-2014, 01:02 PM
 
18,258 posts, read 11,653,926 times
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Quote:
Originally Posted by Escort Rider View Post
What you are describing is fairly common for public sector workers. California public school teachers (statewide) do not fall under Social Security. Whether that alternative is better, worse, or about the same as Social Security depends on the details of the particular pension system you are talking about, and they vary quite a bit. In my case (high school teacher in Calif. for 34 years) I had 8% withheld from my salary as my contribution to the pension. So my "tax" was higher than the FICA tax, but on the other hand my pension is also better. I am not complaining.
Idea was to prevent "double dipping" so thus some federal, state and local government workers along with a few others (those covered by railroad systems IIRC) are exempt from FICA since as you say they are covered elsewhere.
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