Yes. The money employers pay into Social Security is treated by the employer (correctly) as part of the employee’s compensation. So, roughly 14% of the employee’s compensation goes for FICA taxes before the employee even starts to pay income taxes. The wealthy, on the other hand, employ capital gains tax rates and other loopholes to redu…
Yes. The money employers pay into Social Security is treated by the employer (correctly) as part of the employee’s compensation. So, roughly 14% of the employee’s compensation goes for FICA taxes before the employee even starts to pay income taxes. The wealthy, on the other hand, employ capital gains tax rates and other loopholes to reduce their federal income taxes to an average of 14% of their entire income (including FICA, which because of the FICA tax cap at about $120K of income, is close to 0% of their total income). In other words, federal income taxes, rather than being progressive, are actually regressive when you compare what the wealthy pay to what median income wage earners pay.
Actually, even the money you pay into FICA is also taxed for federal income tax purposes. You do NOT get to exclude FICA from your taxable income, so you are paying the Social Security and Medicare taxes, and then paying income tax on that same amount. Your company (which matches the FICA taxes) gets to deduct the FICA tax from its income as a business expense (just as it deducts your salary payments from its income as a business expense). You however pay your income tax on your total earning INCLUDING the amount deducted for FICA. What is even more "interesting" is that when you are paid Social Security payments when you retire, you pay income tax on those payments too. So in some ways, the money used to cover your social security paymennts is taxed twice, once when it is paid to you when you earn your salary and then again when you get paid in retirement.
I recall Warren Buffet saying the woman who cleans his wastebasket pays a higher share of income as tax than he, and that without lawyerly legerdemain.
Yes. The money employers pay into Social Security is treated by the employer (correctly) as part of the employee’s compensation. So, roughly 14% of the employee’s compensation goes for FICA taxes before the employee even starts to pay income taxes. The wealthy, on the other hand, employ capital gains tax rates and other loopholes to reduce their federal income taxes to an average of 14% of their entire income (including FICA, which because of the FICA tax cap at about $120K of income, is close to 0% of their total income). In other words, federal income taxes, rather than being progressive, are actually regressive when you compare what the wealthy pay to what median income wage earners pay.
Actually, even the money you pay into FICA is also taxed for federal income tax purposes. You do NOT get to exclude FICA from your taxable income, so you are paying the Social Security and Medicare taxes, and then paying income tax on that same amount. Your company (which matches the FICA taxes) gets to deduct the FICA tax from its income as a business expense (just as it deducts your salary payments from its income as a business expense). You however pay your income tax on your total earning INCLUDING the amount deducted for FICA. What is even more "interesting" is that when you are paid Social Security payments when you retire, you pay income tax on those payments too. So in some ways, the money used to cover your social security paymennts is taxed twice, once when it is paid to you when you earn your salary and then again when you get paid in retirement.
Yes.
I recall Warren Buffet saying the woman who cleans his wastebasket pays a higher share of income as tax than he, and that without lawyerly legerdemain.