What Are Payroll Tax Supported Programs to You?

In summary: If they were simply "taxes", like all the other things we pay, this would be less of a concern. But because they are insurance programs, conservatives argue that they constitute a transfer of wealth from the rich (who don't pay into them) to the poor (who do pay into them).Now, people on the left argue that:1. The rich don't really pay more in taxes than the poor, because their income is taxed at a higher rate. For example, someone making $250,000 pays the same percentage of their income in taxes as someone making $50,000. 2. These programs
  • #1
russ_watters
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This thread is motivated by discussion of what taxes to include in an accounting of peoples' tax burden. The short background is that people on the left tend to want to include the payroll taxes and people on the right don't. The simplest/safest logic says that taxes are taxes and all should be included, but there are implications to that position that are never addressed. The purpose of this thread is to deal with those implications. First, some samples of recent conversations. The first two quotes go together, the last two are separate.
WhoWee said:
The drive for lower taxation always seem to focus on the wealthy - the truth be told - with nearly 50% of tax-eligible persons either not paying or actually receiving tax revenue - both parties are to blame.
OmCheeto said:
This is wrong according to the http://www.cbo.gov/ftpdocs/88xx/doc8885/EffectiveTaxRates.shtml". But you'll never convince me that they shouldn't be included. So we'll just have to disagree.)[/SIZE]
ParticleGrl said:
Not a true statement, as I've explained in the corporate jet thread. The real number is roughly 10% of people don't pay, and nearly entire demographic is the elderly and students, neither of whom are working full time.
ParticleGrl said:
How are the rich not eligible for medicare or social security? Right now, we do not means test these programs.

Everyone pays taxes, and the upper class don't pay much more than the middle class in total.
Now first a quick admonishment: people make mistakes and are sometimes careless with their wording, but we've had this conversation enough for everyone by now to know what the others are talking about. So while WhoWee's post was missing a qualification ('federal income taxes', not just "taxes"), OmCheeto should have known what was meant. ParticleGrl made a similar error in the last quote which implies that the upper class don't pay much more in $$, when the reality is they pay vastly more in $$ and just not much more (or less, depending on how you slice the data) in %%. So please: don't nitpick when you know what the person means. And I'll be addressing some of the other comments below as well...

Now, for the meat. First, let me summarize the taxes in question:

Social Security: 6.25% up to $106k income, then nothing above that. (temporarily reduced for this year) (both the employee and employer pay equal taxes at this rate)
Medicare: 1.45%, flat. (both the employee and employer pay equal taxes at this rate)
Unemployment: Varies by state, but is typically flat, but with a cap. (paid by employer)

Now, if bundled together (either with both portions or just the employee portions) and considered as a plain ordinary "tax", the "payroll tax" is regressive as the largest piece is capped at a certain income level. So as a fraction of their income, people with high incomes can potentially pay a significantly lower %% than people with low incomes. Easy, right? Well, not so fast:

All three of these programs are insurance programs, designed to relieve the general public of the responsibility of paying for these things out of pocket. They are not part of the normal function of government and were added less than 100 years ago in a pretty major shift in what the government does. For social security and unemployment, benefits are directly tied to contributions (the more you pay in, the more you are eligible to get back) while Medicare has equal benefits for everyone, but contributions are still tied to income on a flat basis.

Conservatives argue that:
1. These services displace services that in the past and in part today, citizens paid for on their own. That makes them different from, say, paying the President's salary and buying warships, which has always been a core function of government.

2. Because these are services previously and partly today financed privately, shifting them to government without changing the cost structure would be an enormous wealth redistribution. Medicare is already a redistribution, since the tax is flat in percentage and not fixed-fee like private insurance, while liberals call Social Security "regressive" because the rich don't pay above a certain $$ value of their income for it. Addressing a concern in a quote above, that's what I meant by saying the rich are largely ineligible for SS: contributions and benefits are both capped above $106K, so people who make above that are not taxed nor do they receive benefits for additional income. Ie, someone who makes $213K a year is taxed on and receives benefits on less than 50% of their income: so they are mostly ineligible for Social Security.

3. The implication of #2 is vast. Today, Social Security and Medicare are fiercely lobbied for and defended by older people. We'll likely see some fierce defense in this thread. The basic argument against massive restructuring (favored by many younger people) is 'I paid in, I should get that money out'. But oops, problem: that logic is only valid if you consider SS and unemployment as insurance/investment programs tied to what you paid in. So this is the key thesis: If you want SS and unemployment to be considered ordinary taxes, you must then also be willing to divorce the benefits from the pay-in. Logic demands that you can't have it both ways. But of course, that logic is not acceptable to many people on either side of the aisle and support for the programs would almost certainly collapse if that happened. So to say the thesis again from the other direction: If you want to consider SS and unemployment to be pay-out based on what you pay-in investment/insurance programs, you logically cannot consider them to be "regular" taxes.

4. Even setting all of the above aside still does not logically allow liberals to combine these taxes with other taxes. The response for a conservative is easy and based on contribution: if you want to consider pay-out based on pay-in for taxes, then fine: The President works for the top half and not the bottom half of the population. The Navy only protects the top half. Only the top half can be allowed to visit national parks. Drive on an interstate. View the Hubble Space Telescope website. Get a weather report. Etc. Etc. Etc. If you want to get paid back what you paid in, then those in the bottom half can have back what they paid into Social Security, but they paid nothing for any of these other programs and shouldn't use them. Sound good or do you want to have someone else pay for your cake and eat it too?
 
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  • #2
I forgot one.

5. Time. Taxes and benefits are separated by time, so while a young worker can claim to be paying a lot of taxes, and old worker is getting a lot of benefits. If you instead look at lifetime contributions vs benefits, you'll find that at best (for liberals) they cancel out and result in a net of zero (implying we should not be counting this with other taxes) and at worst, you'll find that for some demographics - all at upper income levels - the net gain/loss due to the program is hugely negative. In other words, taken cumulatively, the program goes beyond progressive (beyond infinitely progressive) for some demographics, with some people paying in while others get paid out. See samples here: http://en.wikipedia.org/wiki/Social...curity_benefits_under_differing_circumstances
In one demographic, (married, with one worker), the program has increasing benefits up to a $50k income, then a decreasing benefit. If you're single and successful, you get hammered, with net benefit going very negative for high wage earners.

Some of this data was a surprise to me. I didn't realize that the SS program already had some welfare-ish structure to it and see that even with the pyramid-scheme type structure, not everyone even turns a profit. There are winners and losers. Particularly for single, upper income people, you'd be better off throwing the money under a mattress, much less investing it yourself.
 
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Fire companies used to be private too, so those taxes shouldn't be counted. Unless you consider that fire prevention is a benefit to the entire community. Is social security for poor people only, a benefit to rich people?
 
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Jimmy Snyder said:
Fire companies used to be private too, so those taxes shouldn't be counted.
While it's partly about history, it isn't completely about history. Fire companies for centuries flip-flopped between being public and private and ultimately it was realized that like the Navy, it just couldn't be done effectively if done privately.
Unless you consider that fire prevention is a benefit to the entire community. Is social security for poor people only, a benefit to rich people?
Well certainly, particularly in cities, fire protection is a community benefit, since the close proximity of buildings makes it possible for fires to spread.

For social security, I don't see what you are trying to say. I don't see a private/public (fire), rich/poor (SS) parallel. Please explain.
 
  • #5
The real loser when it comes to Social Security, Medicare, and Unemployment is the small business owner. They pay matching taxes for the employees benefit - even if the business owner can't take a paycheck for him/herself. The other item the employer pays is Workmen's compensation - another insurance program enforced as a tax. Further, the business owner is typically not eligible for unemployment or worker's comp.
 
  • #6
russ_watters said:
For social security, I don't see what you are trying to say. I don't see a private/public (fire), rich/poor (SS) parallel. Please explain.
I mean that society in general benefits from the social security of its individual citizens. If not, then why is the govt in the pension business in the first place?
 
  • #7
Jimmy Snyder said:
I mean that society in general benefits from the social security of its individual citizens. If not, then why is the govt in the pension business in the first place?

Actually, SS has also been expanding it's Disability programs the past few years - things like Bi-polar disorder.
 
  • #8
A standing argument against any government based pension or welfare program is that it promotes dependency, whatever the positive benefits of such a program to society. And of course the reason for the government to engage in pension or other benefit programs need have no connection to a benefit for society (whether it does or not), but only to buy more votes and to further itself, i.e. further government.
 
  • #9
Jimmy Snyder said:
Fire companies used to be private too, so those taxes shouldn't be counted. Unless you consider that fire prevention is a benefit to the entire community. Is social security for poor people only, a benefit to rich people?

Everything was private in the beginning. I would imagine it was a libertarian paradise, filled with monkeys. And before them, prokaryotes, et alii.
 
  • #10
Most firefighters in the US are volunteer.
According to the U.S. Fire Administration, about 70 percent of fire companies were staffed entirely by volunteer fire fighters in 2007.
http://www.bls.gov/oco/ocos329.htm
 
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  • #11
Jimmy Snyder said:
I mean that society in general benefits from the social security of its individual citizens.
How so?
If not, then why is the govt in the pension business in the first place?
I don't know/I don't see it. Since it is your argument, why don't you tell me?
 
  • #12
mheslep said:
Most firefighters in the US are volunteer.

http://www.bls.gov/oco/ocos329.htm
That doesn't imply they are private.
 
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  • #13
russ_watters said:
That doesn't imply they are private.
Yes I know, the volunteers are not private for profit, but it does imply they are not government employees and tax supported.
 
  • #14
Ugh, enough! Volunteer fire departments are an interesting case, but they aren't part of the payroll tax, so they aren't relevant to this thread. No more of this read herring/hijack: either address the issue raised in the OP or don't post in this thread! Really, no one has yet addressed the thesis.
 
  • #15
russ_watters said:
Conservatives argue that:
1. These services displace services that in the past and in part today, citizens paid for on their own.
2. Because these are services previously and partly today financed privately, shifting them to government without changing the cost structure would be an enormous wealth redistribution.

Jimmy Snyder said:
Fire companies used to be private too.

russ_watters said:
hijack.
Yikes.
 
  • #16
russ_watters said:
... either address the issue raised in the OP or don't post in this thread! Really, no one has yet addressed the thesis.

Ok. If we allow you to leave out the payroll taxes, then you have to allow us to count the state and local taxes. As I understood Ron Paul's version of how our governments should run, the Feds should be reduced to their basic constitutional functions, and leave the burden of extra items they've taken on to the state and local governments.

From ParticleGrl's link in the jet thread, http://www.itepnet.org/whopays3.pdf, it looks as though all but one state have regressive tax structures. The averages on page 7 show that the lowest quintile pays ~11%, while the top 1% pays ~5%.

So if you add all of the taxes together, leaving out the payroll taxes, the poor are still paying.

Adding https://www.physicsforums.com/showpost.php?p=3385728&postcount=366" and ParticleGrl's numbers:
top 1% --> 22.5% fed + 5% state = 27.5%
bottom 50% --> 0% fed + 10% state = 10% (interpolating the graph)

If we reduce the federal government like everyone wants, then the burden will shift to the states. With the states being unable to print money like the feds, they are either going to stop providing services, go broke, or raise taxes. And with the regressive nature of the state tax systems, it's obvious to me that the tea-partiers really haven't thought this out beyond the ends of their collectively extended fingers.

---------

My apologies if I've not addressed the OP, but not addressing all taxes strikes me as the equivalent of telling people to; "Ignore that man behind the curtain!"
 
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  • #17
OmCheeto said:
If we reduce the federal government like everyone wants, then the burden will shift to the states. With the states being unable to print money like the feds, they are either going to stop providing services, go broke, or raise taxes. And with the regressive nature of the state tax systems, it's obvious to me that the tea-partiers really haven't thought this out beyond the ends of their collectively extended fingers.

Spending cuts do not equal "going to stop providing services" - it means less spending. If we learned anything from the stimulus program it it that when programs are too big - there is waste - hence the shovel ready revelation. Apparently, they just threw money at everything they could find in their wish list and still couldn't spend it all?

Can we agree the individual states can focus more on local spending specifics than the federal government?

Often in these discussions we compare apples to oranges - a good example is when turbo discusses Medicaid in Maine and I'm talking about a major metro area the problems - the problems and situations are night and day. Often I agree with what he says (as related to Maine) but it's not true in Chicago or Detroit.
 
  • #18
WhoWee said:
Spending cuts do not equal "going to stop providing services" - it means less spending. If we learned anything from the stimulus program it it that when programs are too big - there is waste - hence the shovel ready revelation. Apparently, they just threw money at everything they could find in their wish list and still couldn't spend it all?
Is the stimulus spending still going on? And no, that was not a rhetorical question. Outside of PF, I do not follow things very closely.
WhoWee said:
Can we agree the individual states can focus more on local spending specifics than the federal government?
Yes. But by no means does local spending mean that something can't go horribly wrong.


The Examiner said:
Angry public hounds http://washingtonexaminer.com/blogs/beltway-confidential/angry-public-hounds-obscenely-overpaid-city-official-out-job-he-still-gets" out of job -- he still gets $1 million annual public pension
wiki said:
Bell is a city in Los Angeles County, California. Its population was 35,477 at the 2010 census

WhoWee said:
Often in these discussions we compare apples to oranges
Well, it is apples and oranges: Washington and Florida. Every state has a different tax structure, and you can't ignore that fact.
WhoWee said:
- a good example is when turbo discusses Medicaid in Maine and I'm talking about a major metro area the problems - the problems and situations are night and day. Often I agree with what he says (as related to Maine) but it's not true in Chicago or Detroit.

I think I missed the Medicaid in Maine discussion.
 
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  • #20
OmCheeto said:
Ok. If we allow you to leave out the payroll taxes, then you have to allow us to count the state and local taxes.
You are not addressing the point of the thread. The point of this thread is to discuss the implications of including the payroll taxes. I'm trying to find out if you (and others) have thought through what it means to include them. For all the discussion of the issue, I've never seen anyone who wants to include them discuss the implications, which leads me to believe that it's not a thought-through opinion.

Please! Can anyone deal with the implications of what it means for the programs paid for by the payroll tax?
 
  • #21
Jimmy Snyder said:
Yikes.
You looked in your previous post like you might actually have a point to make, but so far have not explained yourself. Do you have a point, or are you just wanting to nitpick the history of fire fighting to distract from discussing social security?
 
  • #22
russ_watters said:
All three of these programs are insurance programs, designed to relieve the general public of the responsibility of paying for these things out of pocket. They are not part of the normal function of government and were added less than 100 years ago in a pretty major shift in what the government does. For social security and unemployment, benefits are directly tied to contributions (the more you pay in, the more you are eligible to get back) while Medicare has equal benefits for everyone, but contributions are still tied to income on a flat basis.

If our elected officials would've left these programs alone - not tried to expand them beyond their original scope or steal their funds for other spending programs (an insurance person would go to prison for "borrowing" from an annuity) we would not be having this discussion. You have described these programs correctly. They should not be counted as taxes - if anything a deferred benefit.

When you pay a tax - there is no implicit or explicit guarantee that you will have a future benefit of any kind. Your taxes might be used to house, feed, educate, and provide medicine to people who sit home all day and watch television because they have bi-polar symptoms or maybe helping community organizers register people to vote or to assist poor people to seek loans or maybe even to help stimulate the economy of Egypt or to study shrimp on a treadmill or to fund an artist who specializes in working with combinations of religious items and human waste - IMO.
 
  • #23
WhoWee said:
The real loser when it comes to Social Security, Medicare, and Unemployment is the small business owner. They pay matching taxes for the employees benefit - even if the business owner can't take a paycheck for him/herself. The other item the employer pays is Workmen's compensation - another insurance program enforced as a tax. Further, the business owner is typically not eligible for unemployment or worker's comp.

I think that the real loser is the employee, since the buisiness owner would/should not have hired the employee if it wasnt in their best interest. Since all costs have to be considered when hiring a new employee, all of them including income tax, state tax, unemployment, workers comp, medicare/medicaid and social security, in effect come out of the employee's negotiated wage. By the time the employee takes the loss of 20-30% for federal taxes, another 12.5% for social security then medicaid/medicare, they have to stick to a artificially low wage so that the business still benefits from their labor or they won't get hired. On top of that, every other tax imposed on employers also comes from the employees, as well as every other citizen when they buy the companies products. It seems to me very counterproductive to tax business for the good of society.

All payroll taxes to me are very oppressive, it would be nice to have a system where everyone is on the same plan. That is that only profits are taxed, or at the very least a system where each dollar is only taxed once. Just think about every dollar we make, first we earn a dollar that aint worth a damn because of all the governments printing, then we pay all taxes associated with our pay, then we pay tax getting to work, tax on where we live, tax on the things we buy, then in the end if we have anything left we pay an estate tax. Somebody on the outside would think we live our lives for the benefit of the government, instead of the government living their life for the benefit of we the people.

* Some of the taxes mentioned above are state taxes and don't specifically fall in line with this thread.
 
  • #24
Jasongreat said:
I think that the real loser is the employee, since the buisiness owner would/should not have hired the employee if it wasnt in their best interest. Since all costs have to be considered when hiring a new employee, all of them including income tax, state tax, unemployment, workers comp, medicare/medicaid and social security, in effect come out of the employee's negotiated wage. By the time the employee takes the loss of 20-30% for federal taxes, another 12.5% for social security then medicaid/medicare, they have to stick to a artificially low wage so that the business still benefits from their labor or they won't get hired. On top of that, every other tax imposed on employers also comes from the employees, as well as every other citizen when they buy the companies products. It seems to me very counterproductive to tax business for the good of society.

All payroll taxes to me are very oppressive, it would be nice to have a system where everyone is on the same plan. That is that only profits are taxed, or at the very least a system where each dollar is only taxed once. Just think about every dollar we make, first we earn a dollar that aint worth a damn because of all the governments printing, then we pay all taxes associated with our pay, then we pay tax getting to work, tax on where we live, tax on the things we buy, then in the end if we have anything left we pay an estate tax. Somebody on the outside would think we live our lives for the benefit of the government, instead of the government living their life for the benefit of we the people.

* Some of the taxes mentioned above are state taxes and don't specifically fall in line with this thread.

A business owner often risks their personal home, savings, investments and additional borrowed funds for the opportunity to open a business and hopefully earn not just a return of their investment and offset of risk - but a profit. An employee fills out an application and proves their identity - then either guaranteed a wage per hour or a salary or a draw/commission structure of some type - benefits vary. The employees are paid whether the business grosses enough to pay the wages - let alone a profit. Some start-up businesses don't expect to earn a profit for the first year or longer - employees are paid regardless.

As for taxes - please show a source regarding your following comment (it's not correct): "By the time the employee takes the loss of 20-30% for federal taxes, another 12.5% for social security then medicaid/medicare, they have to stick to a artificially low wage so that the business still benefits from their labor or they won't get hired.".
 
  • #25
russ_watters said:
This thread is motivated by discussion of what taxes to include in an accounting of peoples' tax burden.

russ_watters said:
Ugh, enough! Volunteer fire departments are an interesting case, but they aren't part of the payroll tax, so they aren't relevant to this thread.

russ_watters said:
You looked in your previous post like you might actually have a point to make, but so far have not explained yourself. Do you have a point, or are you just wanting to nitpick the history of fire fighting to distract from discussing social security?
Sorry, but when I learned that we were supposed to compare SS to other taxes, but that we are supposed to do so without discussing those other taxes, I kind of lost interest. I was not nitpicking about the history of fire fighting, I was nitpicking about the argument that SS should not be considered a tax "because it used to be private". I compared that to the tax collected for fire fighting which also used to be private and violated two rules I think.
 
  • #26
As for the point that I might actually have to make, it might be clearer if I referred to the phrase in the Constitution that seems to negate the rest of the document: "Promote the general welfare". I am asking if the SS program promotes the general welfare. If not, then it should be abolished as unconstitutional. If it does, then perhaps it should be considered a tax. I didn't have a point, I merely asked a question.
 
  • #27
Jimmy Snyder said:
As for the point that I might actually have to make, it might be clearer if I referred to the phrase in the Constitution that seems to negate the rest of the document: "Promote the general welfare". I am asking if the SS program promotes the general welfare. If not, then it should be abolished as unconstitutional. If it does, then perhaps it should be considered a tax. I didn't have a point, I merely asked a question.

Perhaps we should look at the Earned Income Tax Credit (EITC)? EITC was intended to approximately return the amount of Social Security paid into the system in the form of a re-distribution of income taxes (from other people) to families earning (typically) less than $50,000 per year. The credits paid into Social Security are not reduced or adjusted in any way - they just get cash back - regardless of amount paid in taxes. Making work pay and child credits can also be included in this analysis - all are designed to exclude persons earning below $50,000 (approx) from paying taxes. I contend that persons who receive more in tax dollars than they paid in deductions for the year - paid no taxes - and still have the benefits of Medicare, Social Security, and Unemployment - and MIGHT be eligible for Medicaid.
 
  • #28
WhoWee said:
I contend that persons who receive more in tax dollars than they paid in deductions for the year - paid no taxes.
That seems right to me, except for the nitpick that they paid negative taxes, not 'no taxes'. However, impossible to calculate. Sometimes money paid by the govt goes into individual pockets indirectly through a corporation. If that were accounted for, I doubt that the richest 5% pay anything like 50% of the taxes or whatever the numbers are, I just pulled those out of my imperfect memory. Also, how do you account for non-monetary benefits. I like the space program. Does govt spending on that program count as money to me even though I get no cash? But no matter how you slice those considerations, I agree with your point as you stated it. Now how does this address the revised topic of the thread?
 
  • #29
A little more info on EITC
http://www.irs.gov/individuals/article/0,,id=226960,00.html
my bold
"What do I have to do to get EITC?

You must file a tax return to determine your eligibility to claim the EITC. Many miss out because they owe no tax so do not file a tax return.

Free Tax Assistance. Special assistance is available for persons with disabilities. If you are unable to complete your tax return because of a disability, you may be able to obtain assistance from an IRS office or the Volunteer Income Tax Assistance or Tax Counseling for the Elderly Programs sponsored by IRS.

Free File Your Return. Free File is the fast, easy and free way to prepare and e-file your federal taxes online. The Free File program provides free federal income tax preparation and electronic filing for eligible taxpayers through a partnership between the Internal Revenue Service and the Free File Alliance LLC, a group of private sector tax software companies. Or you can use the free fillable tax forms feature. Find out more about Free Filing your return here.

Read more about choosing a preparer.

EITC Impact on Other Government Benefits

Generally, your EITC is not used to determine eligibility for Medicaid, Supplemental Security Income (SSI), food stamps, low-income housing or most Temporary Assistance for Needy Families (TANF) payments. But, if you save your EITC refund for longer than a month, the amount you save might count as a resource and used to determine your future eligibility. Check with your state or local benefit coordinator to find out if EITC affects your other benefits."
 
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  • #30
I think you have to regard SS payments to the government as a tax. My guess is that it will eventually be increased and the SS taxable income cap will be removed as well. The monthly benefit amount can be a relatively low, subsistance level, flat payment, the same for all recipients. There would still be a required minimum SS tax pay-in to qualify for regular SS payments. And means testing will be instituted at some point. The US won't be able to afford to make SS payments to people who have substantial assets and/or substantial retirement income from other sources. It would be interesting to see how many people would be collecting SS given various means test parameters.

Many of the people who pay SS taxes should not expect to get any of it back after retirement. This isn't fair to the relatively rich, but it seems to be necessary. The upside is that the relatively rich will still be relatively rich.

It seems to me that the only way that the US is going to stay at the top is for the government to take progressively more money from the relatively rich (and especially the extremely rich) than it does now. And of course for the government to waste less money also. The problems can't be solved just by cutting spending and being less wasteful. (By "relatively rich" I'm referring to people whose assets/incomes exceed subsistence level by some arguable amount.)

And after all, why wouldn't we be willing to give back generously to a country that has enabled us to become rich, or at least extremely comfortable, instead of spending time, effort and money to minimize what we give to the government. (The first thing that comes to mind is that the government wastes a lot of the money at its disposal, but I think that that's not the fundamental reason why we so strenuously avoid paying taxes.)

In any case, as much as we might not like it, benefits to the poor, especially to the elderly poor via SS, also benefit the general, real economy and thus also benefit lots of relatively rich folks who complain about having to subsidize the livings of the sick, lame, lazy and/or simply unfortunate poor.
 
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  • #31
Jimmy Snyder said:
... I am asking if the SS program promotes the general welfare. If not, then it should be abolished as unconstitutional. If it does, then perhaps it should be considered a tax. I didn't have a point, I merely asked a question.
That debate, limited-enumerated powers govt vs general welfare, has been ongoing for two centuries. The debate was originally between Madison and Hamilton, with Madison's enumerated powers view holding sway more or less up until the Supreme Court cases of the New Deal era when Hamilton's view finally won, at least for now, under court packing threats by FDR. I don't think we'll resolve the issue in this thread.
 
  • #32
russ_watters said:
You are not addressing the point of the thread. The point of this thread is to discuss the implications of including the payroll taxes. I'm trying to find out if you (and others) have thought through what it means to include them. For all the discussion of the issue, I've never seen anyone who wants to include them discuss the implications, which leads me to believe that it's not a thought-through opinion.

Please! Can anyone deal with the implications of what it means for the programs paid for by the payroll tax?

What it means is to confront reality.

The problem with the math of Social Security is something most people have been hearing their entire working life. While it's fun for members of the AARP (and anyone else getting remotely close to retirement age) to claim that the government has to live up to the promises they made when they created Social Security, I wonder how many have spent their working years really believing those promises would be kept.

A pension plan that you're contributing money to means that money is being invested, saved, etc, and that it's there the entire time it's being accumulated. When the money you're 'investing' is actually being used to support the generation that retired before you, then that sounds like a tax, regardless of the words that were used to sell that tax.

To be honest, the only reason there's any possibility of Social Security fulfilling the promises it made to the baby boom generation is that there's a whole bunch of us and we'll elect Congressmen that care more about making sure we get our money than things that will happen to the country after we're dead. And that still doesn't sound like your traditional pension plan.
 
  • #33
I think payroll taxes should be included because it is actual money coming out of the pockets of the people who pay them. If somebody makes 25,000 in a year, and 2,000 comes out of their paycheck due to payroll taxes, that is fairly significant. It would be perverse to point a finger at this person and say "this person doesn't pay federal income taxes!" as if they're some kind of freeloader, when they felt 2000 dollars come out of their pockets that year. It's a tax on their income, by the federal government, based on a percentage of their income... sounds like an income tax to me, and it feels like an income tax when it comes out of the check.

The fact that it's earmarked for a specific benefit instead of going to the general fund seems to be a needless distinction.

This isn't directly related to this thread, but I feel it's close enough to be worth a mention. If people want to get angry that the federal income tax is too progressive, and that the other 50% should "pay something," consider this. Even at a lower percentage of income, the day-to-day impact on the life of a poor person of taxes can often be greater than a higher tax on a rich person. Even if we taxed every dollar of somebody who makes 1,000,000 per year at 90%, they'd still clear 100,000 per year. If somebody here wants to say a person cannot survive on clearing 100k per year, I'd like to hear it.

Contrast that with somebody who makes 15,000 per year. At that amount, a person will be barely struggling to make ends meet, and is probably risking homelessness at any time. Taxing them at a mere 2% per year would take 300 dollars away from them. That could be the difference between eating and not eating for 2 months. I'd argue that in this scenario, the person making 15,000 per year is being taxed much more harshly than the person making 1,000,000 per year, despite one being 2% and the other being 90%
 
  • #34
Jack21222 said:
I think payroll taxes should be included because it is actual money coming out of the pockets of the people who pay them. If somebody makes 25,000 in a year, and 2,000 comes out of their paycheck due to payroll taxes, that is fairly significant. It would be perverse to point a finger at this person and say "this person doesn't pay federal income taxes!" as if they're some kind of freeloader, when they felt 2000 dollars come out of their pockets that year. It's a tax on their income, by the federal government, based on a percentage of their income... sounds like an income tax to me, and it feels like an income tax when it comes out of the check.

The fact that it's earmarked for a specific benefit instead of going to the general fund seems to be a needless distinction.

This isn't directly related to this thread, but I feel it's close enough to be worth a mention. If people want to get angry that the federal income tax is too progressive, and that the other 50% should "pay something," consider this. Even at a lower percentage of income, the day-to-day impact on the life of a poor person of taxes can often be greater than a higher tax on a rich person. Even if we taxed every dollar of somebody who makes 1,000,000 per year at 90%, they'd still clear 100,000 per year. If somebody here wants to say a person cannot survive on clearing 100k per year, I'd like to hear it.

Contrast that with somebody who makes 15,000 per year. At that amount, a person will be barely struggling to make ends meet, and is probably risking homelessness at any time. Taxing them at a mere 2% per year would take 300 dollars away from them. That could be the difference between eating and not eating for 2 months. I'd argue that in this scenario, the person making 15,000 per year is being taxed much more harshly than the person making 1,000,000 per year, despite one being 2% and the other being 90%

If the person making $25,000 and has $2,000 in payroll deductions receives a $5,000 tax "refund" - they didn't pay any taxes.

As for your other example - the $1,000,000 earner - is it a small business owner that risked everything to create this income and hired other people (also paid their matching taxes and insurances)?
 
  • #35
WhoWee said:
If the person making $25,000 and has $2,000 in payroll deductions receives a $5,000 tax "refund" - they didn't pay any taxes.

As for your other example - the $1,000,000 earner - is it a small business owner that risked everything to create this income and hired other people (also paid their matching taxes and insurances)?

Don't be so thick. If a business owner makes a million dollars a year in salary, it's not a small business.
 

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