Should payroll taxes be abolished?

[Zoupa]

What are payroll taxes? Serious question. I get the feeling I'd be interested in the debate, but I don't know the term.

Is it federal and where applicable state taxes taken directly off your paycheck?

[MadImmortalMan]

Payroll taxes are 1.45% for medicare paid by the employee and 6.8% paid by the employee and another 6.8% paid by the employer for social security. This is before our income taxes are calculated.

[Admiral Yi]

They are taxes which in theory are dedicated to paying for Social Security and Medicare/Medicaid.

You get no exemption with these taxes; the very first dollar you earn gets taxed at 7.5% to pay for Social Security and 2.5% (I think) to pay for Medicare/Medicaid.  The employer matches your contribution on Social Security.  I'm not crazy about this part of the fiction either.

Only the first $64K or so in annual earned income gets hit with these taxes.  Unearned income (i.e. investment income) is not hit at all.  So as you can see they are very regressive taxes, as they hit the lower income groups for a greater chunk of their income.

SS and Medicare/aid are federal programs and the taxes are a purely federal matter.

p.s. MIM comes in with the precise numbers.

[Martinus]

Ok, so these are like our social security / health / unemployment insurance contributions.

[Martinus]

Something like 20/60/20 maybe?

Yes, if these are percentages of national wealth and not percentages of national population.

[crazy canuck]

What are payroll taxes? Serious question. I get the feeling I'd be interested in the debate, but I don't know the term.

Is it federal and where applicable state taxes taken directly off your paycheck?

Not being sarcastic but I thought you lived in Canada.

CPP and  EI are examples of payroll taxes in Canada.  They are just as regressive as they are in the US. 

 

[Grey Fox]

What are payroll taxes? Serious question. I get the feeling I'd be interested in the debate, but I don't know the term.

Is it federal and where applicable state taxes taken directly off your paycheck?

Not being sarcastic but I thought you lived in Canada.

CPP and  EI are examples of payroll taxes in Canada.  They are just as regressive as they are in the US. 

Might be lost in translation. I've never heard of them being refered to payroll taxes outside of Languish.

What's CPP? I'm guessing we have a Quebec equivalent instead of the Canadian wide one.

[crazy canuck]

What are payroll taxes? Serious question. I get the feeling I'd be interested in the debate, but I don't know the term.

Is it federal and where applicable state taxes taken directly off your paycheck?

Not being sarcastic but I thought you lived in Canada.

CPP and  EI are examples of payroll taxes in Canada.  They are just as regressive as they are in the US. 

Might be lost in translation. I've never heard of them being refered to payroll taxes outside of Languish.

What's CPP? I'm guessing we have a Quebec equivalent instead of the Canadian wide one.

I see.  CPP is the Canada Pension Plan.  Quebec may have its own equivalent.  But it is still a payroll tax.

[Grey Fox]

Yep. RRQ.

[PJL]

The UK government is considering just that, though it certainly won't happen much earlier than 2020, it's only at the consultation phase right now

[OttoVonBismarck]

I don't know how the other governments do it, but unless I'm mistaken Yi doesn't like the fact that we don't really have a "Medicare" or "Social Security" trust fund or anything that this money is going into. Instead, the Federal government just takes the money and it essentially mixes in with all tax receipts and is then used for whatever. Medicare and Social Security cash payouts are basically covered from the same pot of money as everything else. We leave basically treasury bonds in what is supposed to be the Social Security fund. This is why social security is said to be going bust, we do not actually accrue real assets but "intergovernmental debt." Since we basically issue new bonds out of thin air and move it into the fund the social security program holds like 40% of total government debt in the United States.

In fact, that's one of the weird fiscal fictions many are unaware of, when Clinton ran a "budget surplus" for several years, he actually didn't by any metric other than that used in government accounting. His general budget was in the green for those years, but only if you excluded the fact that each of those years billions of new debt was being created to plug into the social security system to make up for the cash collected out of it and used in the budget itself for other things. So if you factor in the new borrowing Clinton was actually doing (and that all Presidents do every budget) none of his budget years during his entire Presidency were actually positive overall.

In some ways it might make sense to just abolish this fiction we have a fund that we're paying into and instead just admit we are just funding the current benefits with a big pot of taxes that are used for every bit of spending we need to do, and leaving new debt instruments in its place (it'd be different if we were just giving cash and then the SSA was buying existing debt instruments, but we actually create new debt to put into the fund so we actually go further in debt perpetually.)

[dps]

In fact, that's one of the weird fiscal fictions many are unaware of, when Clinton ran a "budget surplus" for several years, he actually didn't by any metric other than that used in government accounting. His general budget was in the green for those years, but only if you excluded the fact that each of those years billions of new debt was being created to plug into the social security system to make up for the cash collected out of it and used in the budget itself for other things. So if you factor in the new borrowing Clinton was actually doing (and that all Presidents do every budget) none of his budget years during his entire Presidency were actually positive overall.

I was aware of this, and had mentioned it on Languish a long time ago, but I think a lot of people didn't believe me.

[crazy canuck]

I don't know how the other governments do it, but unless I'm mistaken Yi doesn't like the fact that we don't really have a "Medicare" or "Social Security" trust fund or anything that this money is going into.

I thought Yi's point was that the rationale for having them - ie to create some sort of buying to the system, was not sound policy.

Doesnt your point support his conclusion?

[MadImmortalMan]

I don't know how the other governments do it, but unless I'm mistaken Yi doesn't like the fact that we don't really have a "Medicare" or "Social Security" trust fund or anything that this money is going into.

I thought Yi's point was that the rationale for having them - ie to create some sort of buying to the system, was not sound policy.

Doesnt your point support his conclusion?

It was done that way in the beginning to sell it to the public as a savings/investment thing rather than a welfare program. Those older generations didn't like teh welfare.

[Valmy]

I was aware of this, and had mentioned it on Languish a long time ago, but I think a lot of people didn't believe me.

I have mentioned on languish as well.  I believe you

One of the reasons I was so frustrated by the Bush tax cuts and weird tax credits...for a non-existant surplus.  Of course I wanted the "surplus" to go to the debts.  But oh well.  Nothing we can do about it now.