There’s has been a lot of talk lately in the news on ‘payroll taxes’ and how Democrats and Republicans are unable to reach a deal.
A Democrat, Barney Frank (http://en.wikipedia.org/wiki/Barney_Frank), made this point today in ‘The Great American Debate’:
- If you make one hundred thousand dollars ($100,000) per year, you're taxed on 100% of your income.
- If you make one million dollars ($1,000,000) per year, you're taxed on 10% of your income.
Yes, this makes no sense and is completely unfair – thanks to Barney Frank for brining it up.
The rich cats are not paying their fair share in taxes
Breaking it Down
Since this gets confusing fast and most of the media outlets are unable to clearly present facts that are not brain-dead simple, let’s break it down. Check out this payroll taxes article on Wikipedia -
http://en.wikipedia.org/wiki/Payroll_tax
Specifically, let’s take a look at the ‘Social Security and Medicare’ section -
Social Security and Medicare taxes
Main article: Federal Insurance Contributions Act tax
Federal social insurance taxes are imposed equally on employers[5] and employees,[6] consisting of a tax of 6.2% of wages up to an annual wage maximum ($106,800 in 2010) for Social Security and a tax of 1.45% of all wages for Medicare.[7] For the year 2011, the employee's contribution has been temporarily reduced to 4.2%, while the employer's portion remained at 6.2%.[8] To the extent an employee's portion of the 6.2% tax exceeded the maximum by reason of multiple employers, the employee is entitled to a refundable tax credit upon filing an income tax return for the year.[9]
So, confirming our original point above, for payroll taxes, and the amount we pay for Social Security -
- If you make one hundred thousand dollars ($100,000) per year, you're taxed on 100% of your income.
- If you make one million dollars ($1,000,000) per year, you're taxed on 10% of your income.
This is completely unfair – as far as payroll and Social Security taxes, the rich should be taxed the same percentage the middle class does.
Note: the current maximum social security benefit payment at retirement age of is $2,366 per month, or $28,392 per year. When the rich start paying their fair share we should take a look at these limits and adjust accordingly.
Maybe Social Security is not doomed after all – if only the rich paid their fair share?
From HBO’s ‘The Wire’: ‘This game is rigged, man’
That's one of the issues that will come up during the 2012 US Presidential elections, with Democrats like Barney Frank and President Obama on the side of the middle class and the Republican nominee on the side of the rich.
There are many issues to think about during a US Presidential election, but if you are not making one million dollars per year, think about your own interests and vote Democrat next year.
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