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>why does EITC exist? To relieve the regressive payroll tax (FICA) on low-income families.
by PopAlongKid 2y ago
>why does EITC exist?
To relieve the regressive payroll tax (FICA) on low-income families.
- loeg 2y agoFICA taxes aren't regressive.
- latency-guy2 2y ago"Regressive" in this context really doesn't mean anything, it's a label that is reached for when politically convenient. So I agree.
- collinmcnulty 2y agoRegressive has a specific meaning regarding taxes. It means that the rate of the tax decreases with income. Whether a tax is regressive or not is a factual question.
- torstenvl 2y agoFICA taxes are, as a matter of inarguable, objective fact, regressive, which is to say that people who make more money pay a lower rate of FICA taxes. This is due to two facts: (a) FICA taxes do not apply to interest or capital gains or other income sources that apply solely to middle class and above; and (b) FICA taxes do not apply to income above ~$160k. Please do not post misinformation.
- loeg 2y agoThe FICA system, of which taxes are one component, also pays out a lower proportion to higher earners. https://www.ssa.gov/oact/cola/bendpoints.html https://www.ssa.gov/oact/cola/bendpoints.html It is incorrect to describe the system as regressive. It's a little weird to lump it all together as FICA taxes, too. Social security is more of a mandatory pension program that caps both contributions and benefits for high earners (in addition to progressively lower benefits for higher earners on the back end). Medicare taxes are straight up progressive -- there is an extra 0.9% tax bracket on higher W-2 income and the 3.8% NIIT investment income tax on stocks.
- PopAlongKid 2y agoThe question was, why doe EITC exist, not is the reason still relevant today (although I'd argue it is). The additional medicare taxex you mention have only existed for about ten years, EITC goes back to the 1960s as I recall.
- loeg 2y agoThe primary historical motivation of the EITC was to "reform" the former AFDC welfare program. There was concern that AFDC was growing too quickly: welfare rolls increased from fewer than 1 million families in 1964, to more than 3 million in 1973. There was also concern that the AFDC program discouraged working. The EITC is structured to incentivize work, even at low wages. Another precipitating motivation was a recession in 1974 (EITC dates to 1975). https://crsreports.congress.gov/product/pdf/R/R44825/8 https://crsreports.congress.gov/product/pdf/R/R44825/8 (PDF)
- deleted 2y ago[deleted]