First of all, since WordPress won’t let me embed the poll image inside a post and inside a widget, here’s the link to the poll or you can vote in the widget on the right hand side of this blog page.
The question is, should Social Security be funded via a flat tax instead of a regressive tax?
You probably know that income tax in the United States is progressive, meaning not only do you pay more dollars in tax the more you earn, you also pay a higher percentage of your income. A flat tax as an income tax would take one percentage — say 10% for easy math examples — and apply it across the board. So, the argument goes, yes, the person who makes $20,000 pays the same percentage as the person who makes $200,000, but the first person only pays $2,000 and the second pays the yearly income of the first person. The progressive tax takes into consideration that as you make more money, your quality of life is likely to increase as well and so from that stand point, the flat tax, although “consistent” is not “fair.”
Ironically, the Social Security tax of 6.2% is not even a flat tax. It does not come close to consistent, to say nothing of fair. It’s not fair. It is inconsistent and unjust. Here’s why:
The maximum amount anyone could possibly pay in SS payroll tax (6.2%) is $7,049: this is because only income up to $113,700 is taxed.
6.2% on $25k = $1550
6.2% on $35k = $2170
6.2% on $50k = $3100
6.2% on $75k = $4650
6.2% on $100k = $6200
6.2% on $113,700 = $7049 —-> the MAX anyone ever pays
Once you earn more than $113,700, you never pay more than $7049. From thereon out, the percentage of your income that you pay into social security goes down — it decreases; i.e. it becomes a regressive tax.
So if you make $150k then $7,049 = 4.7% of your income.
If you make $200,000 then $7,049 = 3.5% of your income.
If you make $250,000 then $7,049 = 2.0% of your income.
If you make $500,000 then $7,049 = 1.4% of your income.
If you are a millionaire, you pay in 1/10th of one percent!
Is it fair? You do the math.
2 thoughts on “Collecting Social Security via Flat Tax instead of a Regressive Tax would Fund it through 2080”
Know what else will fund Social Security? a slight raise to the Payroll tax. Just a slight jump of 1.75% will do the trick and we’ll hardly even notice.