Fiscal FactCheck: payroll tax = income tax!

Fiscal FactCheck.

Astonishing fact is buried here: Payroll taxes (social security, medicare etc) have almost caught up with federal income tax. Payroll taxes are 40% of federal receipts in 2010, while personal income tax was 41.5%.

Payroll taxes tend to be quite regressive — they start at about 10% of ALL payroll income for your first dollar, and fall to about 2.3% above $100,000 or so. So this means we have a bizarre combination of progressive and regressive tax rates. And it’s more evidence of how high health care costs are dragging everything down (in this case, via Medicare costs).

By the way, many “conservatives” have suggested a “flat income tax”  e.g. 17%. As far as I can tell, this does NOT include payroll taxes. So it would not be flat at all – it would be highly regressive. Another factor is that richer people earn more from capital gains and other sources not counted as income. I’d love to see someone lay out the numbers carefully on this. Some information is in this report by Congressional Research Services. 

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One thought on “Fiscal FactCheck: payroll tax = income tax!

  1. Pingback: Skin in the game | bellbookcandledotcom

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