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The 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://ww
by loeg 3y ago
The 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 3y 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 3y 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 3y ago[deleted]