The “Evil” Payroll Tax

The Payroll Tax increase has been well documented recently and I would like to use this blog to offer some perspective because I think most of our anger is misguided. Yes, our checks are smaller, but this isn’t a new tax. Since the 1930’s, Americans have paid a FICA tax, which helps fund Social Security and Medicare. I realize there are people who take advantage of this system and you should be angry at them, but many of us are helped by the program.

Please read my paper on my Social Security experience, so you can see it does have its benefits even though it’s far from perfect. I dream of one day being off the “system.” I would do anything to live in a world where I could work for myself and be able to afford all the care I needed. One day it will happen, but until then, I am trapped. All I ask from you is that while I’m figuring out how to achieve that dream, you think of guys like me when you complain about the payroll tax. It doesn’t really help my self-esteem.

Of all the taxes we pay, this is the most tolerable one. Not only does it help others, but it forces us to put a little money away for retirement. We have all heard the scare tactics that Social Security will run out and my generation won’t have it for retirement, but we forget the elderly (on Social Security) have the highest voter turnout and the AARP is very strong. Social Security was designed as a promise for contributing to the country. We contribute through working and paying into the system, so that when we retire, we can get a little payback for that effort. I’m pretty sure most of us didn’t take the extra money from the tax break and put it into a retirement fund, so this actually will help you in the long run, especially now that many small businesses don’t provide retirement plans for their employees.

I believe that if you’re going to be angry, you shouldn’t be angry at the Payroll Tax, but that there is a limit on the FICA tax. For 2013, FICA taxes are only taken out of salaries up to $113,700. This means a majority of us are taxed for our whole salary, but the wealthy aren’t. Medicare taxes have no limit, but that is only 1.45% where FICA is 6.2%. Imagine how much more money would be put in Social Security if millionaires paid 6.2% on their whole salary! Alex Rodriguez is a very famous name and a good example. ARod makes around $25 million a year, which would mean $1,550,000 could go in the Social Security fund. I think that would be a lot more helpful than the $375 I contribute!

Just for fun, I have to mention President Obama because he’s supposed to be all for the “middle-class.” He earns a salary of $400,000 a year. It sure would be nice if he paid $24,800 into FICA to help insure that the rest of us could have some kind of retirement plan instead of the $7,050 he is required to pay in 2013. Politicians have their own retirement plan (nobody can justify why, so don’t try) and will never use Social Security, but they should still pay in and help their fellow Americans!

Please don’t misunderstand; I am NOT for raising income taxes on the rich. I think the State and Federal Tax Codes are jokes and they need to be completely re-written. As a manager of a nonprofit, I would rather the rich give money to charity instead of giving more to a Government that will mismanage it.

This is only about the Payroll Tax because it has solid evidence that it does help people. It would help even more if everyone did their “fair” share.

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