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Old 05-12-2018, 06:47 PM
 
Location: Old Bellevue, WA
18,794 posts, read 13,579,606 times
Reputation: 7921

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I learned eons ago in econ 101 that the "employer's share" of social security contributions amounts to a bookkeeping fiction, an economic sleight of hand. Officially, the current rates are 6.2% (of income) paid by the employer, and 6.2% by the employee, for a total of 12.4%. There's also a 1.45% payment by employer and employee for Medicare.


All told, it adds up to 15.3% of every paycheck, capped currently at $128,400/yr.


The truth is that all 15.3% comes out of the employees' pockets. This is generally true of payroll taxes. The Congressional Budget Office is staffed with bunches of PhD economists who understand this. For all analysis,


https://www.cbo.gov/sites/default/fi...xRates2006.pdf
Quote:
Originally Posted by CBO
Who Pays Taxes?


CBO assumes—as do most economists—that employers’ share of payroll
taxes is passed on to employees in the form of lower wages than would otherwise
be paid. Therefore, the amount of those taxes is included in employees’ income, and
the taxes are counted as part of employees’ tax burden.

I knew a guy who owned a real estate business. When I told him the entire 15.3% comes out of employees' pockets, he looked at me in disbelief. "I write those [SS] checks," he exclaimed. I bet that not one in 100 Americans understand this, even though Social Security is not far from being 100 years old.
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Old 05-12-2018, 08:03 PM
 
Location: OH>IL>CO>CT
4,748 posts, read 7,495,900 times
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Isn't this also true of any benefit that is supposedly paid for by the employer ?

Like health insurance, pension, 401K match, PTO, FMLA, etc , etc.

Money that might have gone to salary is set aside to cover these.

Once had an employer stop paying a quarterly bonus because he said his part of health insurance was getting too high. Which may have been OK for those using the Co. insurance plan, but screwed those who had other coverage.
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Old 05-13-2018, 02:20 AM
 
64,576 posts, read 66,100,109 times
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yep , no news here . any perk you get is a trade off . the employer pays it and you get that much less in wages .

aren't we paying for for the grocery store owners fica and insurance's when we buy something ? we sure are . in the end those employer dollars come from us the consumer so in effect you can say we are paying the whole thing not the employer
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Old 05-13-2018, 05:43 AM
 
Location: The Triad (NC)
26,847 posts, read 57,851,863 times
Reputation: 29251
Quote:
Originally Posted by wutitiz View Post
The truth is that all comes out of the employees' pockets.
This is true of paid time off and health insurance as well.
It's called the "paternalistic model"

Ya know why it is? People tend to be irresponsible idiots.
Too few who can be relied upon to make the payments on their own...
or to set aside the cash needed to live on during their time off.

Did you have some other point?
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Old 05-13-2018, 02:50 PM
 
Location: Old Bellevue, WA
18,794 posts, read 13,579,606 times
Reputation: 7921
Quote:
Originally Posted by MrRational View Post
This is true of paid time off and health insurance as well.
It's called the "paternalistic model"

Ya know why it is? People tend to be irresponsible idiots.
Too few who can be relied upon to make the payments on their own...
or to set aside the cash needed to live on during their time off.

Did you have some other point?
The points are a) the gov't lies to us by perpetuating this bookkeeping fiction; b)most Americans are not aware of it/don't understand it. A third point might be that few public schools have ever taught economics. IMO that is because the gov't doesn't want people to understand things like this.
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Old 05-13-2018, 03:02 PM
 
17,621 posts, read 12,203,533 times
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I don’t think the employer side is capped fwiw
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Old 05-13-2018, 04:42 PM
 
Location: The Triad (NC)
26,847 posts, read 57,851,863 times
Reputation: 29251
Quote:
Originally Posted by wutitiz View Post
The points are a) the gov't lies to us by perpetuating this bookkeeping fiction;
b)most Americans are not aware of it/don't understand it.
Oh.

Quote:
A third point might be that few public schools have ever taught economics.
IMO that is because the gov't doesn't want people to understand things like this.
Start another thread.
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Old 05-13-2018, 04:44 PM
 
Location: OH>IL>CO>CT
4,748 posts, read 7,495,900 times
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Quote:
Originally Posted by Lowexpectations View Post
I don’t think the employer side is capped fwiw
For the SS portion of FICA payroll tax, yes it is capped, same as employee. This from
https://www.ssa.gov/OACT/COLA/cbb.html

" an individual with wages equal to or larger than $128,400 would contribute $7,960.80 to the OASDI program in 2018, and his or her employer would contribute the same amount."

Since 1993, the Medicare (HI) portion of FICA is not capped for either one.
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Old 05-13-2018, 04:51 PM
 
Location: North Beach, MD on the Chesapeake
32,107 posts, read 39,170,046 times
Reputation: 40515
Quote:
Originally Posted by wutitiz View Post
The points are a) the gov't lies to us by perpetuating this bookkeeping fiction; b)most Americans are not aware of it/don't understand it. A third point might be that few public schools have ever taught economics. IMO that is because the gov't doesn't want people to understand things like this.
Actually Economics is an elective course in many school systems and required in many more.

And, just like most high school and introductory college courses, it's a mile wide and an inch deep. High school Econ courses are typically a cross between theory (college prep) and general personal finance. There is an AP Econ offered but it's really heavy on theory.

The fact that all fringe benefits cut salaries might or not be mentioned. Not analyzed ad infinitum, mentioned.
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Old 05-13-2018, 08:33 PM
 
4,202 posts, read 1,537,227 times
Reputation: 5267
Quote:
Originally Posted by wutitiz View Post
The truth is that all 15.3% comes out of the employees' pockets. This is generally true of payroll taxes.
Would employee's pay go up if payroll taxes were eliminated? No. Those funds would go to profits. For the last 15 years that's been the trend: as productivity and profitability increases, wages have been flat. Corporations are not sharing their success with employees.

http://phillipsandco.com/files/5615/...te_Profits.JPG
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