FICA Tax, steal from average workers to cut taxes for the rich

Every wage earner in the United States pays FICA tax, which is the tax that funds social security. Your employer is required to match your contribution, bringing the total tax to 12.4%.

The problem is, there is an income limit of $106,000 above which there is no FICA tax.

The other problem is, the government issues IOUs to the social security trust fund and uses that money to fund the general government operations.

Now, let's look at the swindle:

Based on an IRS study of the 400 wealthiest American taxpayers, their "effective tax rate" was 16.5%. Effective tax rate is basically the final percentage after all deductions, write offs, and loop holes are taken into account.

Now take a taxpayer making $50,000 / year, who does the standard deduction. This taxpayer actually pays around 14% effective tax.

So, when the wealthy complain about higher taxes they really aren't paying that much higher percentage after all their exemptions, write offs, and loop holes.

Then comes social security tax. Add the 6.2% paid by the $50,000 worker, and you come up with 20% tax. Add in the employer's portion (which puts downward pressure on wages), and you actually have a 26% effective tax rate.

With the exemption of wages over $106,000, social security tax has a negligible effect on the effective tax rate of the uber-rich.

Now you may be saying, "So what? Employees eventually get that money back".

Let me demonstrate some scenarios that will unfold as social security becomes depleted.

1. The government will raise the social security tax, as they have done many times. They will likely leave the income exemptions (but likely increase them for inflation). Since the government won't be able to borrow from social security anymore, income taxes will have to be increased to cover government operations.
2. They will phase out social security, leaving millions of American's out in the cold in retirement despite the fact that they paid into the system their whole lives.

In either case, social security taxes have been taken from average wage earners, then transferred to the general operating fund and used to fund the government. When the time comes to pay the IOUs, the government will either cancel the "internal debt" by eliminating social security, or it will raise the social security tax.

The reality is, after social security taxes are taken into account, average wage earners pay a higher percentage of their income to fund the bloated federal government than their wealthy counterparts. Social security taxes are taken disproportionately from average Americans, and those funds used to fund the government, while their wealthy counterparts stop paying into social security after $106,000.

Because the government borrows from social security to keep taxes artificially low, the social security tax is a defacto tax increase on the average American taxpayer. In essence, the wealthy get tax breaks on the backs of average American workers.

While I agree that we need to get our financial house in order, I see nothing being done by either party to fix this problem. We must stop borrowing from the social security trust fund, and we must raise taxes and cut spending to ensure that social security remains viable for current and future workers. If we can't get our financial house in order, we will see a drastic decline in American power, influence, and prestige.