FICA’s the most regressive federal tax

[Supposn]

Employees’ contribution to the FICA payroll tax is without a doubt the most regressive federal tax. There’s the employees’ direct contribution, and the employers’ contribution to the payroll tax which hinders job creation and is thus of some detriment to the nation’s median wage.
In addition to discouraging hiring, employers’ contribution, (a tax upon business enterprises) is passed onto customers and thus behaves similar to a sales tax. (A message regarding hidden FICA from prior links within commercial transaction chains will follow).

There is absolutely no logical relationship between income and medical need. No portion of FICA payroll tax should used to fund any portion of Medicare. A broader based tax such as a general sales tax would be the more appropriate choice.

It is logical but unfeasible for wage earners’ in general to entirely fund their own social security retirement annuities. It is politically unfeasible to grant employees less FICA payroll tax reduction than that granted to employers.

Historically lacking a federal retirement program, (despite historically shorter life spans) were severe hardships. If Social Security, (SS) is terminated, the additional extent of USA’s population segments driven into poverty would be economically and socially disastrous. Many SS retirees had physically demanding jobs and/or are unable to earn a living. State and county public assistance programs couldn’t replace SS. Those who contend that Social Security is detrimental to our economy do not appreciate the alternative economic devastation if it were terminated.

I advocate that 1/2 of FICA’s portion now earmarked for Social Security Retirement. (6.2% of payroll) should rather be funded by a federal sales tax. The entire portion of FICA’s earmarked for Medicare, (2.9% of payroll) should also be funded by a federal sales tax. A general sales tax has a larger tax base than a payroll tax.

All wage earners and commercial enterprises would benefit from any portion of FICA that was revenue neutrally transferred to a general sales tax but lower income earners and smaller commercial enterprises would most benefit (from such a transfer). Cash flow’s a particularly critical problem for small businesses.

Refer to the following message, “FICA imbedded within purchases of U.S. goods and services”.

Respectfully, Supposn

 

[Supposn]

The employees’ and their employer each contribute 7.65% of the employee’s wages for FICA payroll taxes. Customer rather than Businesses pay taxes levied upon commercial enterprises. If my son’s correct, a general sales tax of (1/3)(.153) = 5.1% general sales tax could entirely replace FICA’s revenue. My guesstimate’s (.45)(.153) = 6.88% general sales tax that could entirely replace FICA’s revenue.

I cannot claim to “know” what portion of goods and services aggregate prices are due to hidden and imbedded employers’ labor expenses. When an auto repairer bill itemizes parts and labor, that includes costs directly expensed to the auto repair and the overhead expenses allocated to the repair. FICA is applicable to all labor costs. There’s the repairer’s itemized labor, the repairer’s un-itemized labor imbedded within the repairer’s overhead expenses, and the total labor passed on by every other commercial enterprise within the chain of transactions that includes links for materials, components, services paid for by the repairer for direct and indirect expenses to repair the auto.

Let’s use my son’s guesstimatation of 1/3 of our total sales are due to the cost of labor, than FICA’s entire 15.3% tax upon wages could be entirely replaced by a 5.1% federal sales tax.

At present wage earners’ pay directly contribute 7.65% of their wages to the FICA payroll tax. Using the 1/3 factor, all of us, (including wage earners) functioning as purchasers are paying the equivalent of a 2.53% sales tax for employers’ FICA contributions.

If wage earners spent their entire remaining 92.35% of their wages upon goods and services with imbedded employers’ FICA contributions, they are directly and indirectly paying;
(.0765)[1 + (92.35)(1/3)] = .101 of their wage income for the FICA payroll tax.
.101 > .051

I’m a proponent of eliminating Medicare’s 2.9% of FICA and 1/2 of Social Securities’ 12.4% of FICA. If payrolls comprise 1/3 of our total sales transactions, the eliminated 9.13% of payroll tax revenue could be replaced with a 3.366% federal sales tax. Employers’ and employees’ FICA contributions would each be reduced by 4.55% of the employee’s wages. Each of their remaining FICA contributions would be 3.1% of the employee’s wages.

I advocate any additional FICA funding of Social Security be limited to no more than ½ of the additional SS funding. The FICA payroll tax would continue to be supported by both employees and employers.

Respectfully Supposn