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FICA’s our most regressive federal tax.

Discussion in 'Economics, Business, and Taxes' started by Supposn, Jan 25, 2015.

  1. Supposn

    Supposn Council Member

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    FICA’s our most regressive federal tax. FICA’s task is to fund the U.S. Social Security Administration’s retirement, long- term disability and Medicare programs. Reduction of these entitlements would be significantly net detrimental to both our economy and to our society.


    There is no logical relationship between employment and medical need. Although an argument could be made for funding employee’s retirement and non-employment related long- term disability entirely from their wages, it is not financially feasible to do so. (Workman’s compensation should continue to be funded primarily from workman’s compensation taxes paid by employees).


    Employers portions of FICA taxes paid are passed on within prices of all goods and services paid by all, (including USA wage earners and their families). If USA sales transactions subject to a general sales tax is twice the amount of employers’ payrolls subject to the 7.65%, then their revenue is currently the equivalent of a of a (1/2)(0.0765 / 1.0765) = (1/2)(0.071142) = 0.035571 general sales tax.

    If USA sales transactions subject to a general sales tax is 1/3 the amount of USA payrolls, then their revenue is currently the equivalent of a (1/3)(0.071) = 0.02333 general sales tax.


    Currently USA employees directly pay 7.65 % percent of their wages and due to the FICA imbedded within the prices of their expenditures they directly and indirectly pay the equivalent of totals somewhat within 9.447% to 10.67% of their expenditures.


    I’m an advocate that FICA's entire portion of revenue earmarked for Medicare and half of the social security retirement’s portions of FICA revenue all be replaced with revenues from a general federal sales tax.

    If we replaced both 4.655% of payroll FICA taxes upon payrolls from both employers and employees FICA taxes with a federal general sales tax of 4.55%, there would be an insignificant reduction of direct and indirect FICA taxes paid by wage and salary earning families, lesser penalty upon employers that choose to increase their payrolls and somewhat increasing tax revenues that fund Social Security and Medicare.


    This is not an entire solution but it is a start to remedying FICA’s revenue shortfall, reducing the regressive character of our FICA payroll tax, retaining the Social Security’s and Medicare’s full benefits and reducing the shortfall of their funding.


    Respectfully, Supposn
     
  2. Supposn

    Supposn Council Member

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    Wahbooz posted this within the thread http://www.politicaljack.com/thread...urity-is-in-trouble.67034/page-5#post-1270953 :

    You just don't get it, or you're playing games. Those at the lower level of the economic strata will be the ones paying the majority of your sales tax into the Social Security fund, based on their income spent on necessities. Working people pay the vast majority of their income on necessities. People with more money do not.

    No, hell no, it will not reduce tax revenues to collect sales taxes to fund Social Security. What it will do is put the majority of the burden more on working people.

    I don't know if you're being obtuse or what, but I'll just say this. Anyone who falls for this scam deserve what they get. And I will just leave it at that. Pass along your propaganda, and anyone who swallows it deserves to pay through the nose as more wealthy people walk away paying next to nothing.

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    Wahbooz, I’m among those that advocate a reducing portions of federal tax revenues on based upon payrolls with a federal sales tax; (i.e. replacing tax revenues amounting to 9.1% of payrolls, (4.65% of payroll contributed by each employee and each employer) with a single federal sales tax of 4.65% rate.

    Currently employees’ directly pay 7.65% of their employment compensation as FICA taxes and the 7.65% of payrolls paid by employers are imbedded within prices of all domestic produced goods and services.
    Thus currently employees and their families directly and indirectly pay a total within the range of 9.9% - 10.2%, (approximately 10%) of their employment derived incomes for FICA taxes.

    Currently employers directly pay 7.65% of their payrolls for FICA that are passed on as imbedded within prices of all domestic produced goods and services.
    Employers FICA taxes have a detrimental effect upon enterprises’ cash flows which is critical to young enterprises or enterprises experiencing financial difficulties; additionally penalizing enterprises for increasing their payrolls is detrimental to numbers of jobs and the median wage.

    This partial shifting of tax revenue sources from payrolls to a sales tax basis would somewhat increase tax revenues while decreasing the restricting of employers’ cash flows and the aggregate tax burdens upon employees and their families. Increasing tax revenues would better enable retention of our nation’s Social Security retirement and long term disability benefits which are of significant benefit to our entire economy and of particular benefit to ex-employees, their families.

    The exact proportion of tax reduction upon employees’ wages is dependent upon the ratio of USA’s payrolls and the aggregate volume of transactions that would be subject to a federal tax. The figures I provided were calculated upon USA payrolls being within the range of 1/3 to ½ of USA transaction volumes subject to a federal sales tax.

    Respectfully, Supposn
     
  3. Supposn

    Supposn Council Member

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    Transcription of a response by Wahbooz, (post #60 within the thread http://www.politicaljack.com/threads/cbo-says-social-security-is-in-trouble.67034/page-3), "CBO says social security is in trouble”:

    I don't believe I said FICA taxes were spent for anything other than Social Security. I said the surplus of FICA taxes are invested, and the treasury uses those funds. And Social Security is NOT in trouble, it has something in the neighborhood of $3 trillion in investment vehicles.

    But a sales tax to replace the FICA and Medicare tax will not provide the proper funding for Social Security, because money has to be spent to pay a sales tax. Unless you plan on putting a sales tax on investments, the funding of Social Security and Medicare will be unfairly carried out by working people. And even then, with tax shelters, a certain sector of society will still escape unscathed.
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    Wahbooz, replacing 9.1% tax upon payrolls subject to FICA with a 4.55% general sales tax would increase federal revenue earmarked for Social Security and Medicare with no increase of net taxes paid by the working poor and their dependents. Increasing the funding for these programs are advantage to our entire economy and particularly advantageous to the working poor and their dependents.

    Respectfully, Supposn
     
  4. Lukey

    Lukey Senator

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    It was never supposed to be progressive. The SS program was sold as "insurance" with benefits based on income level (and contributions) and a limit to how much of a benefit you can receive, no matter how much you make. The left now decides they want it to redistribute wealth (so what else is new?) and use this program that was never designed for that as a way to enact even more wealth redistribution. When will it be enough for you guys - when everybody has exactly the same amount?
     
  5. Supposn

    Supposn Council Member

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    Lukey, USA’s Social Security was proposed and has always been a form of federal insurance.

    Additionally throughout the its enactment and all of the updating of the laws and regulations regarding it, our U.S. Social Security retirement and long term disability programs have not only been of net benefit to USA’s aggregate employees and their families, but has been of net benefit to our nation’s economy.


    I do not suppose those with opinions contrary to my own are particularly opposed to all progressive improvement of society in general or of USA’s national economy.

    If you could describe what specifically you are opposing, and/or advocating, that could be subject to discussion.


    Respectfully, Supposn
     
  6. Lukey

    Lukey Senator

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    You stated that it was a "regressive" tax and I pointed out that it was designed that way for a specific reason.
     
  7. Supposn

    Supposn Council Member

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    Lukey, you correctly state that FICA was drafted, enacted and currently remains as a "regressive" tax.


    (Adjusting for whatever is the purchasing power of the U.S. dollar during any year), the reductions of our nation’s budget deficits, and regressive character of our taxes are generally to our nation’s economic best interest.

    With regard to FICA, all of this can be achieved no increase of our aggregate taxes or benefit reductions of our Medicare, Social Security retirement and disability programs.


    Respectfully, Supposn
     

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