Monday, June 16, 2008

Supreme Dishonesty, And, Unfortunately, Very Effective

Most people have very little understanding of how much they really pay in FICA taxes. A few comments to this Hugh Hewitt post highlight the truth:

12.4% Tax Hike for All

Hugh, under Obama's plan all workers would 'pay' 6.2% more on the targeted income, but wouldn't employers also 'pay' the other 6.2% as well? After all, that is money available for and allocated to payroll costs for any business, not just what the employee sees on their paystub.

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12.4 NOT 6.2 ...

The Feds take 12.4% if you are self employeed ... and all you W-2 workers would get a 6.2% raise if you had to pay it all yourself ...

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Anyway, that always seemed to me to be one of the truly sleazy things about payroll taxes: make people believe that they are being taxed only 6.2%, when in reality, one is being taxed 11.68%. How can I say that? Well, if someone's income is $100k, their employer is actually paying $106,200. (And I'm even ignoring medicare.) If it weren't for having to pay this amount, the employer could afford to pay that employee $106,200. (And by labor supply and demand, incomes would definitely rise to about that amount.) So, payroll taxes really are taking 11.68%, not 6.2%. Certainly self-employed people know what I'm talking about. Again---this is not accounting for FICA taxes for medicare either.

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