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The FICA taxes are supposedly shared between employer and employee. Both pay a 6.2 percent Social Security tax. Employer and Employee both also pay a Medicare tax of 1.45%. All told, it comes to 15.3% on every dollar we earn, up to $118,000.
However, the notion of 'employer share' is really just a bookkeeping fiction. The entire 15.3% effectively comes out of the employee's pocket. This is how the CBO treats the 15.3% in its analysis of policy proposals.
CBO's analysis of effective tax rates 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
In other word's the full 15.3%, not just half, would be diverted to your pay if Social Security and Medicare were to magically disappear.
The FICA taxes are supposedly shared between employer and employee. Both pay a 6.2 percent Social Security tax. Employer and Employee both also pay a Medicare tax of 1.45%. All told, it comes to 15.3% on every dollar we earn, up to $118,000.
However, the notion of 'employer share' is really just a bookkeeping fiction. The entire 15.3% effectively comes out of the employee's pocket. This is how the CBO treats the 15.3% in its analysis of policy proposals.
In other word's the full 15.3%, not just half, would be diverted to your pay if Social Security and Medicare were to magically disappear.
Too drastic. Retired people need that; they deserve it. It would create a host of new problems, because we would have to pay for our parents' housing and medical bills.
This makes sense (and is somewhat obvious). Social Security/Medicare isn't an employer benefit. It's an employee benefit. Employees should be paying the full amount. Fortunately, employers does the government and employee's a big favor by taking care of the accounting.
Same with any other non-wage compensation. Employees cross-shop higher pay versus better medical benefits all the time as well and it's much of the reason wages have been fairly stagnant. Compensation hasn't been. It's just your raises have mostly gone to paying for your medical benefits for the last 20 years so you don't see it.
I'm self-employed. On paper, the rates I charge versus what employees in my field make seem high. In actuality, we actually make less than most employees do. The advantage is in flexibility and not in pay. Also why I won't take government per diem work any longer. Union negotiations cap what we can charge at the top of the salary scale and offsets, so we're paid about $45-50/hr. It's not even close to worth it once you take out both sides of FICA, no vacation time, holidays, health insurance, retirement. Plus you're not going to work every day. Back when I couldn't find other work and did do government per diem contracts, I always missed at least 1-2 days a pay period and often the work was sporadic at best. That $45/hr is more like $20-$25/hr employee equivalent versus starting $35/hr for no job security. The only reason anyone does it is because it's a per diem to hire arrangement, but it's a long per diem process now and I'm not interested in working for peanuts for years for a chance to get a boring government job.
Too drastic. Retired people need that; they deserve it. It would create a host of new problems, because we would have to pay for our parents' housing and medical bills.
We'll find another solution when our time comes.
I think you misunderstood the post. I was not advocating for SS and Medicare to disappear. Just saying that if hypothetically it were to disappear, the full 15.3% would go to the employee--not half to employer and half to employee. Getting rid of SS and Medicare outright would obviously be a political impossibility at this point.
This makes sense (and is somewhat obvious). Social Security/Medicare isn't an employer benefit. It's an employee benefit. Employees should be paying the full amount. Fortunately, employers does the government and employee's a big favor by taking care of the accounting.
Employees actually are paying the full amount--that's the whole point. I believe that the accounting costs also effectively come out of the employee's pocket. It is part of the cost of keeping the employee on staff. The employer does not care which pockets any of these costs go into. The employer only cares what is the total cost of keeping person x on staff. It doesn't matter whether the money goes to person x, or to the gov't or to an accountant.
I think you misunderstood the post. I was not advocating for SS and Medicare to disappear. Just saying that if hypothetically it were to disappear, the full 15.3% would go to the employee--not half to employer and half to employee. Getting rid of SS and Medicare outright would obviously be a political impossibility at this point.
I disagree.
As one example, there are dozens of threads on this forum debating minimum wage. There are many who argue vehemently that ANY mandated increase in minwage is detrimental and a drag on employment.
Do you really think that eliminating SS would result in a 7.65% (employer portion) raise to minwage earners? Time and again we have seen businesses grab price reductions and add to their bottom line, rather than pass these savings along to consumers, shareholders or employees.
As some examples:
if world oil prices drop, we don't see relief at the pump, but if oil prices increase, the price at the pump goes up.
Microsoft, Google and Apple have a hundred billion or more in cash reserves, yet their dividends are not particularly large.
Manufacturing companies such as GM and Boing demand wage concessions from unions in tough times, yet do not give back in profitable times.
Why would you think that companies would pass on the SS savings rather than bank them?
Same with any other non-wage compensation. Employees cross-shop higher pay versus better medical benefits all the time as well and it's much of the reason wages have been fairly stagnant. Compensation hasn't been. It's just your raises have mostly gone to paying for your medical benefits for the last 20 years so you don't see it.
I'm self-employed. On paper, the rates I charge versus what employees in my field make seem high. In actuality, we actually make less than most employees do. The advantage is in flexibility and not in pay. Also why I won't take government per diem work any longer. Union negotiations cap what we can charge at the top of the salary scale and offsets, so we're paid about $45-50/hr. It's not even close to worth it once you take out both sides of FICA, no vacation time, holidays, health insurance, retirement. Plus you're not going to work every day. Back when I couldn't find other work and did do government per diem contracts, I always missed at least 1-2 days a pay period and often the work was sporadic at best. That $45/hr is more like $20-$25/hr employee equivalent versus starting $35/hr for no job security. The only reason anyone does it is because it's a per diem to hire arrangement, but it's a long per diem process now and I'm not interested in working for peanuts for years for a chance to get a boring government job.
Until the clients dry up and the lay offs start, then everyone and there mom is on usajobs desperately trying to get in, I cant even imagine the number of applicants usa jobs got in 08/09 and things are not really that much better right now.
People do it because once your in your in, there is no such thing as fed govt job lay offs or even firings. While everybody likes the noble "hustle" it gets old when you start pushing 40, I don't want to "hustle" for work anymore when im that age but yet that's still a long ways away from formal retirement.
For the most part, you are at the mercy of your employer. If they can get away with paying less while having you pay for more, I think in most cases they will do it. Competition and quality are factors that might ensure an employee gets paid more, nothing the government does that companies don't later make their employees regret.
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