4 ms·

I am never sure what to think of these claims when Social Security and Medicare (both employer and employee parts) taxes aren't counted as income taxes. Seems a

I am never sure what to think of these claims when Social Security and Medicare (both employer and employee parts) taxes aren't counted as income taxes. Seems a bit deceiving not to include those taxes as income taxes as they are based on a percent of your income (and only a part of your income if you make over about $100k for Social Security).

jbuzbee 9y ago
They aren't counted because basically they're forced savings. Typically everything you put into SS you'll get back. Lower income folks end up getting more back than they put in. And the same for Medicare. It's a forced insurance payment of sorts.
- r00fus 9y ago
  Not while the general fund is allowed to steal from SS and then declare it as "debt". The vast majority of the US debt is owed to SS recipients.
  - wpietri 9y ago
    Are you sure? From what I can tell, it's not close. Total debt is $19.4T; intergovernmental debt is $5.4T: https://www.treasurydirect.gov/govt/reports/pd/mspd/2016/opds062016.pdf https://www.treasurydirect.gov/govt/reports/pd/mspd/2016/opd... And given that the total trust fund appears to be $2.8T, I'm not sure how it could hold the majority of the debt: https://ycharts.com/indicators/us_oldage_and_survivors_insurance_trust_fund_assets_at_end_of_year https://ycharts.com/indicators/us_oldage_and_survivors_insur...
    - r00fus 9y ago
      Who owns the US Nation Debt [1]. I stand corrected, the vast majority is owed not just to Social Security, but to retirees in general (though SS is the largest debt holder). [1] https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalance.com/who-owns-the-u-s-national-debt-33...
      - wpietri 9y ago
        Again, I would like you to show your numbers, because I am not seeing the vast majority being owed to retirees, either.
- Steko 9y ago
  No, the truth is they aren't counted because correctly counting them would undermine the bullshit conclusion they're pushing.
  - ovao 9y ago
    To count Social Security and Medicare withholding as part of federal income taxes would be incorrect, as neither are income taxes (they are payroll taxes.) I think to correctly frame what proportion any income group (or wealth group) pays, you have to look not just as federal income taxes, but at all taxes.
    - Steko 9y ago
      I think you are arguing past me on the first part. They are "payroll taxes", yes. And there is a "US federal income tax" of which they are not, yes. Technically they do also fit the definition of what an income tax is (wikt:"A tax levied on earned and unearned income"; wikipedia "Retirement oriented taxes, such as Social Security or national insurance, also are a type of income tax, though not generally referred to as such"). More to the point, and I think we agree here, the deception is by framing the discussion only about the "us federal income tax" when that is only 60% of the total federal income/payroll taxes collected. If you tell people that the top 1% makes 22% of the money and pays 40% of federal income taxes it makes them sound oppressed. If you tell people that the top 1% makes 22% of the money, has 35% of wealth and pays 25% of federal income and payroll taxes, the oppression disappears.
gnicholas 9y ago
True, but you also get paid back based on your Social Security payments (should you live so long). To the extent that it's a forced-savings program, it isn't exactly an income tax.
- maxerickson 9y ago
  The government has borrowed and spent the entire trust fund. There are no savings, it's funded year to year from taxes. (the left hand of the government says it has $2.8 trillion and the right hand of the government thinks that is a cool story https://www.ssa.gov/oact/TRSUM/index.html https://www.ssa.gov/oact/TRSUM/index.html )
  - gozur88 9y ago
    This is true, but on the other hand it hardly makes sense for the government to save and borrow at the same time.
    - maxerickson 9y ago
      Oh, I'm not trying to sensationalize it, I just think it is fair to peak at the actual cash flows when people start talking about Social Security as a savings program.
- SilasX 9y ago
  As a retirement savings vehicle, it has a pitiful rate of return, and the payouts may decrease, or taxes thereon increase, before you retire, since they're only "invested" in extremely low yielding, not-legally-enforceable bonds.
- mikeash 9y ago
  It’s money that’s taken from me by the government whether I want to or not. The fact that it goes into a separate bucket used for a particular program doesn’t somehow make it not a tax. Especially since it’s very much not a forced savings program. If it were, we’d pass on the remainder to our heirs if we died early, and we’d run out of money if we lived too long. It’s more like a forced annuity.
walshemj 9y ago
One loop hole that should be closed in the USA is the $1 salary which many SV founders and board members do to avoid paying social security.
- maxerickson 9y ago
  Are they that petty that payroll taxes are really part of the calculation? (It's ~$10,000-$15,000 for valley salaries... https://www.ssa.gov/oact/cola/cbb.html https://www.ssa.gov/oact/cola/cbb.html )
  - lovich 9y ago
    Yes they are that petty. Steve Jobs parked in handicapped parking spots because he couldn't be bothered to walk as far as normal people. Zuckerberg rolled up to Hawaii, bought some land, and tried to sue all the locals off of the rights they had enjoyed for generations before he showed up. Bill Gates, for all the good he does now, was a giant dick to everyone he did business with at every chance he got. The super rich are the pettiest people on the planet because unlike regular people, they don't deal with the consequences. If an average person starts doing everything they technically are allowed to do, they will be shunned socially. When that happens, beyond feeling bad, you lose your support network and can get into serious trouble in life. The rich don't have that problem. They don't need to rely on the good will of others to watch their kids, or to give them time off to go handle bank issues or medical problems.
    - maxerickson 9y ago
      You are describing anti-social behaviors, not really addressing my question. Do you think that keeping $15,000 out of the Social Security system is an animating reason for them to take the non salaries? I think it is more like a few hundred thousand dollars not really being a relevant amount of money to someone with hundreds of millions of dollars of stock on the line and the symbolism being useful.
      - walshemj 9y ago
lisper 9y ago
> Seems a bit deceiving It's more than a bit deceiving. It's part of a systematic disinformation campaign. It goes hand-in-hand with the outrageous lie that the estate tax harms family farmers. But cutting taxes on the rich is indefensible on the merits, so deception is the only option if you're rich and you don't want to pay taxes.
- refurb 9y ago
  The percentage of taxes paid by the highest income earners is lower when you include all taxes, but still pretty significant.[1] These numbers do not include state taxes, only federal. Income percentile - % individual income tax paid - % all taxes paid Top 10% - 83.4% - 65% Top 5% - 69.4% - 53% Top 0.01% - 26.4% - 19.2% Note that anyone in the bottom 50% actually has a negative income tax contribution since they get tax credits. For the top 0.01% of income earners, the average total tax rate is 46.3%. Much higher than I originally thought. [1]https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/Distribution-of-Tax-Burden-Administration-Policy-2017.pdf https://www.treasury.gov/resource-center/tax-policy/tax-anal...
  - njarboe 9y ago
    I don't see capital gains on that chart. Is it part of income? I think most rich people grow their wealth with capital gains that are only taxed when realized and even then are taxed at a lower rate than regular income.
    - cjlars 9y ago
      Read the footnotes, it's lumped into individual income taxes.
- alexasmyths 9y ago
  " It's part of a systematic disinformation campaign. " Oh, no, I'm sorry but it's the other way around. The 'mass lie' is on the employer payroll tax side of the equation. An employer payroll tax is for all purposes the same thing as an employee tax, but it's 'hidden' (i.e. you don't see it as a deduction) - but it's equally as oppressive. Politicians love it because they can increase it without any visibility and no uproar. It's about 30% in Sweden. Also - up to ~50% income tax. And then 25% VAT. Can you imagine if Google had to take 30% of your salary off the top before they paid you? And then you're effective rate wast 10% higher (like 40%?). And then everything you bought was 25% taxed? And the other form of 'hidden tax' - in many places, prices have to be quoted with VAT to hide the 'hit' they take. Admittedly you get healthcare for that. It's very reasonable to call this confiscation of wealth. If you're a professional, you're giving by far and away most of your earnings to the government to have them manage it on your behalf.
metaphor 9y ago
> and only a part of your income if you make over about $100k for Social Security More precisely, 6.2% on a wage base limit of $127,200 for calendar year 2017, which amounts to $7,886.40 per person; 1.45% for Medicare without a cap, and an additional 0.9% withholding in excess of $200,000. For the unindoctrinated, the IRS publishes these (and other related) details under Notice 1036[1] every year circa December. [1] https://www.irs.gov/forms-pubs/about-notice-1036 https://www.irs.gov/forms-pubs/about-notice-1036
- njarboe 9y ago
  Plus, I believe, the employer part which is another 6.2% on a wage base limit of $127,200. A bit hidden away so you don't think about it too much.
  - metaphor 9y ago
    Yeah, employer pays the same 6.2% and 1.45%, respectively...except for the additional 0.9% Medicare conditional, which is withheld from the employee only. The self-employed effectively pay double out of pocket.
pyronik 9y ago
People presumably benefit from those directly in old age, should we count how much people spend in groceries too?
cjlars 9y ago
Here you go! https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/Distribution-of-Tax-Burden-Current-Law-2017.pdf https://www.treasury.gov/resource-center/tax-policy/tax-anal...

jbuzbee 9y ago

They aren't counted because basically they're forced savings. Typically everything you put into SS you'll get back. Lower income folks end up getting more back than they put in. And the same for Medicare. It's a forced insurance payment of sorts.

r00fus 9y ago
Not while the general fund is allowed to steal from SS and then declare it as "debt". The vast majority of the US debt is owed to SS recipients.
- wpietri 9y ago
  Are you sure? From what I can tell, it's not close. Total debt is $19.4T; intergovernmental debt is $5.4T: https://www.treasurydirect.gov/govt/reports/pd/mspd/2016/opds062016.pdf https://www.treasurydirect.gov/govt/reports/pd/mspd/2016/opd... And given that the total trust fund appears to be $2.8T, I'm not sure how it could hold the majority of the debt: https://ycharts.com/indicators/us_oldage_and_survivors_insurance_trust_fund_assets_at_end_of_year https://ycharts.com/indicators/us_oldage_and_survivors_insur...
  - r00fus 9y ago
    Who owns the US Nation Debt [1]. I stand corrected, the vast majority is owed not just to Social Security, but to retirees in general (though SS is the largest debt holder). [1] https://www.thebalance.com/who-owns-the-u-s-national-debt-3306124 https://www.thebalance.com/who-owns-the-u-s-national-debt-33...
    - wpietri 9y ago
      Again, I would like you to show your numbers, because I am not seeing the vast majority being owed to retirees, either.
Steko 9y ago
No, the truth is they aren't counted because correctly counting them would undermine the bullshit conclusion they're pushing.
- ovao 9y ago
  To count Social Security and Medicare withholding as part of federal income taxes would be incorrect, as neither are income taxes (they are payroll taxes.) I think to correctly frame what proportion any income group (or wealth group) pays, you have to look not just as federal income taxes, but at all taxes.
  - Steko 9y ago
    I think you are arguing past me on the first part. They are "payroll taxes", yes. And there is a "US federal income tax" of which they are not, yes. Technically they do also fit the definition of what an income tax is (wikt:"A tax levied on earned and unearned income"; wikipedia "Retirement oriented taxes, such as Social Security or national insurance, also are a type of income tax, though not generally referred to as such"). More to the point, and I think we agree here, the deception is by framing the discussion only about the "us federal income tax" when that is only 60% of the total federal income/payroll taxes collected. If you tell people that the top 1% makes 22% of the money and pays 40% of federal income taxes it makes them sound oppressed. If you tell people that the top 1% makes 22% of the money, has 35% of wealth and pays 25% of federal income and payroll taxes, the oppression disappears.

gnicholas 9y ago

True, but you also get paid back based on your Social Security payments (should you live so long). To the extent that it's a forced-savings program, it isn't exactly an income tax.

maxerickson 9y ago
The government has borrowed and spent the entire trust fund. There are no savings, it's funded year to year from taxes. (the left hand of the government says it has $2.8 trillion and the right hand of the government thinks that is a cool story https://www.ssa.gov/oact/TRSUM/index.html https://www.ssa.gov/oact/TRSUM/index.html )
- gozur88 9y ago
  This is true, but on the other hand it hardly makes sense for the government to save and borrow at the same time.
  - maxerickson 9y ago
    Oh, I'm not trying to sensationalize it, I just think it is fair to peak at the actual cash flows when people start talking about Social Security as a savings program.
SilasX 9y ago
As a retirement savings vehicle, it has a pitiful rate of return, and the payouts may decrease, or taxes thereon increase, before you retire, since they're only "invested" in extremely low yielding, not-legally-enforceable bonds.
mikeash 9y ago
It’s money that’s taken from me by the government whether I want to or not. The fact that it goes into a separate bucket used for a particular program doesn’t somehow make it not a tax. Especially since it’s very much not a forced savings program. If it were, we’d pass on the remainder to our heirs if we died early, and we’d run out of money if we lived too long. It’s more like a forced annuity.

walshemj 9y ago

One loop hole that should be closed in the USA is the $1 salary which many SV founders and board members do to avoid paying social security.

maxerickson 9y ago
Are they that petty that payroll taxes are really part of the calculation? (It's ~$10,000-$15,000 for valley salaries... https://www.ssa.gov/oact/cola/cbb.html https://www.ssa.gov/oact/cola/cbb.html )
- lovich 9y ago
  Yes they are that petty. Steve Jobs parked in handicapped parking spots because he couldn't be bothered to walk as far as normal people. Zuckerberg rolled up to Hawaii, bought some land, and tried to sue all the locals off of the rights they had enjoyed for generations before he showed up. Bill Gates, for all the good he does now, was a giant dick to everyone he did business with at every chance he got. The super rich are the pettiest people on the planet because unlike regular people, they don't deal with the consequences. If an average person starts doing everything they technically are allowed to do, they will be shunned socially. When that happens, beyond feeling bad, you lose your support network and can get into serious trouble in life. The rich don't have that problem. They don't need to rely on the good will of others to watch their kids, or to give them time off to go handle bank issues or medical problems.
  - maxerickson 9y ago
    You are describing anti-social behaviors, not really addressing my question. Do you think that keeping $15,000 out of the Social Security system is an animating reason for them to take the non salaries? I think it is more like a few hundred thousand dollars not really being a relevant amount of money to someone with hundreds of millions of dollars of stock on the line and the symbolism being useful.
    - walshemj 9y ago

lisper 9y ago

> Seems a bit deceiving It's more than a bit deceiving. It's part of a systematic disinformation campaign. It goes hand-in-hand with the outrageous lie that the estate tax harms family farmers. But cutting taxes on the rich is indefensible on the merits, so deception is the only option if you're rich and you don't want to pay taxes.

refurb 9y ago
The percentage of taxes paid by the highest income earners is lower when you include all taxes, but still pretty significant.[1] These numbers do not include state taxes, only federal. Income percentile - % individual income tax paid - % all taxes paid Top 10% - 83.4% - 65% Top 5% - 69.4% - 53% Top 0.01% - 26.4% - 19.2% Note that anyone in the bottom 50% actually has a negative income tax contribution since they get tax credits. For the top 0.01% of income earners, the average total tax rate is 46.3%. Much higher than I originally thought. [1]https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/Distribution-of-Tax-Burden-Administration-Policy-2017.pdf https://www.treasury.gov/resource-center/tax-policy/tax-anal...
- njarboe 9y ago
  I don't see capital gains on that chart. Is it part of income? I think most rich people grow their wealth with capital gains that are only taxed when realized and even then are taxed at a lower rate than regular income.
  - cjlars 9y ago
    Read the footnotes, it's lumped into individual income taxes.
alexasmyths 9y ago
" It's part of a systematic disinformation campaign. " Oh, no, I'm sorry but it's the other way around. The 'mass lie' is on the employer payroll tax side of the equation. An employer payroll tax is for all purposes the same thing as an employee tax, but it's 'hidden' (i.e. you don't see it as a deduction) - but it's equally as oppressive. Politicians love it because they can increase it without any visibility and no uproar. It's about 30% in Sweden. Also - up to ~50% income tax. And then 25% VAT. Can you imagine if Google had to take 30% of your salary off the top before they paid you? And then you're effective rate wast 10% higher (like 40%?). And then everything you bought was 25% taxed? And the other form of 'hidden tax' - in many places, prices have to be quoted with VAT to hide the 'hit' they take. Admittedly you get healthcare for that. It's very reasonable to call this confiscation of wealth. If you're a professional, you're giving by far and away most of your earnings to the government to have them manage it on your behalf.

metaphor 9y ago

> and only a part of your income if you make over about $100k for Social Security More precisely, 6.2% on a wage base limit of $127,200 for calendar year 2017, which amounts to $7,886.40 per person; 1.45% for Medicare without a cap, and an additional 0.9% withholding in excess of $200,000. For the unindoctrinated, the IRS publishes these (and other related) details under Notice 1036[1] every year circa December. [1] https://www.irs.gov/forms-pubs/about-notice-1036 https://www.irs.gov/forms-pubs/about-notice-1036

njarboe 9y ago
Plus, I believe, the employer part which is another 6.2% on a wage base limit of $127,200. A bit hidden away so you don't think about it too much.
- metaphor 9y ago
  Yeah, employer pays the same 6.2% and 1.45%, respectively...except for the additional 0.9% Medicare conditional, which is withheld from the employee only. The self-employed effectively pay double out of pocket.

pyronik 9y ago

People presumably benefit from those directly in old age, should we count how much people spend in groceries too?

cjlars 9y ago

Here you go! https://www.treasury.gov/resource-center/tax-policy/tax-analysis/Documents/Distribution-of-Tax-Burden-Current-Law-2017.pdf https://www.treasury.gov/resource-center/tax-policy/tax-anal...