From: mykes@amiga0.SF-Bay.ORG (Mike Schwartz)
Newsgroups: alt.fan.rush-limbaugh
Subject: Re: Tax Fairness
Distribution: usa
X-NewsSoftware: GRn 1.16f (beta) by Mike Schwartz & Michael B. Smith
Date: 12 Aug 92 04:06:06 PST
Organization: Amiga makes it possible

In article <1992Aug11.181719.24810@natinst.com> davoli@natinst.com (Russell J. Davoli) writes:
> In article <1992Aug11.104307.8401@hemlock.cray.com>, rja@redwood26.cray.com (Russ Anderson) writes:
> > From the Wall Street Journal (Tues, Aug 11, 1992):
> >
> > A memo from Jack Kemp, Vin Weber, Newt Gingrich, Connie Mack,
> > Trent Lott, Bob Kasten, and Malcolm Wallop.
> >      [...]
> >      For people making just over $15,000 a year in 1992, the
> >      effective marginal tax rate is 47%, compared to only
> >      23% in the mid-60s.  [The 47% figure reflects a 15% income
> >      tax rate, a 15% payroll tax, and the jolt of the phase out
> >      of the earned income tax credit.]  The 1990 budget deal
> >      increased the top federal marginal rate to 34% from 28%
> >      for a family of four, a 21% increase.
>
> Could somebody explain the payroll tax?  And why does it apply to the lower
> income folks and not the higher ones?  And what's the earned income tax
> credit?  I seem to remember glancing at it when doing my taxes and noting
> that it didn't apply to me, but all I remember was that it somehow applied
> to low income folks with children.
>

FICA is a payroll tax.  People are taxed 15% (plus a fraction) on the first
$59,000 in income they earn.  Money earned above $59K is not taxed at all
(for fica purposes; income tax still applies :)  Thus FICA is a regressive
tax on those who make $59K or less - they are paying 15% of their income.
Someone making $1Mil is paying 15% on 1/20th of their income.

> Assuming that the information in the memo is correct, it seems like these
> folks would be arguing for a tax decrease on the lower- and middle-income
> folks, rather than boosting the tax rates on the high-income people.
>

There are two ideas receiving attention in this regard.  First is to increase
the $59K boundry to something much higher.  IMO, no upper limit at all would
be fine - and fair (everyone pays 15%, period).  However, I am not a believer
in a flat tax rate (as in 15%), unless it is 0% :)  The second idea is to
do "means testing" on recipients.  When I retire, for example, if I can reverse
mortgage my home and/or have sufficient pension funds and/or have 401K plans or
IRAs to give me sufficient income (to be determined), then I would not receive
ANY Social Security benefits, even though I paid my $7500/year in FICA tax all
my life.

In some respects, the FICA "tax" isn't a real tax - since people paying the
tax get their money back with interest...  However, some of us won't be
getting any Social Security because the fund will go broke (due to aging
baby boomers making a run on the bank) in the first few decades of the
21st century.  FWIW, I KNOW I won't be getting any :)

> It's also unclear to me if they are counting the Social Security withholding
> as a tax.  It might as well be, and I think we ought to be trying to find a
> way to phase it out.  Now that 401K and IRA plans are widely available, who
> needs the government to "save" our money for us?


I am not an accountant or legally trained, but I do believe that 401K plans are
limited to 10% of your income (a benefit to the rich, but less than FICA to
the poor) and would hurt the less well off in the long run.  And I believe that
IRAs are no longer tax deductions (I may be wrong about this...).

--
Amiga programmer of: GRn, MailMinder, Budokan, Beyond Dark Castle, Dark Castle
Sega Genesis programmer of: Dick Tracy and Marble Madness.
Mike Schwartz  (ames!zorch!amiga0!mykes or mykes@amiga0.sf-bay.org)
1124 Fremont Ave.
Los Altos, CA 94024

Newsgroups: alt.fan.rush-limbaugh