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OASDI and Medicare taxes actually regressive taxes. It costs you less (as a percentage) once you exceed whatever the current threshold is ($178k this year, IIRC

OASDI and Medicare taxes actually regressive taxes. It costs you less (as a percentage) once you exceed whatever the current threshold is ($178k this year, IIRC). Remember that the definition of a progressive tax is that the rate goes up as your income goes up, a regressive tax is the opposite. Up to the current year's threshold, your OASDI and Medicare tax rate is constant, and then it drops.

dmoy 2y ago
If we're being pedantic:. oasdi is extremely regressive (no tax at all above like 2x median household income, vs e.g. income taxes which continue ramping up until closer to 10x median income after becoming flat). Medicare tax is not capped, and is slightly progressive in that it jumps from 2.9% to (I forget like % higher) at somewhere around 3x median household income.
- Jtsummers 2y ago
  Ah, you're right about Medicare. Not sure where I got that it was capped from. An extra 0.9% for wages over $200k. But yeah, we agree, the individual I responded to is mistaken in calling OASDI a progressive tax. It's regressive since the rate drops.
Kirby64 2y ago
I mentioned the income cap. And no, that is not true. The benefit you get some social security is reduced substantially as you contribute to the upper end of the cap. You might be taxed less proportionally once you exceed the cap but also don’t receive more benefits. The benefits you receive in retirement when drawing on social security are proportionally less. For example (a few scenarios I ran here) with a “full retirement age” set to 2035 (when you’d be 67) If you earned a constant wage of $50k/yr, you would be able to draw $2044/mo in SS. Tax per year would be 6.2%, or $3100/yr. If you earned a constant wage of $150k/yr, you would be able to draw $3843/mo. Tax per year would be $9300/yr. You receive about 88% more benefits but contribute 300% more money. How is that not progressive taxation?
- Jtsummers 2y ago
  You're using the term "progressive tax" to talk about the benefit or return, which is not what it actually means. Progressive, flat, and regressive taxes are not about how the money gets used or redistributed. It's a simple thing: Is the tax rate constant across all incomes? Flat. Does the tax rate increase as income increases? Progressive. Does the tax rate decrease as income increases? Regressive. OASDI is a regressive tax. Flat for the first $176k, then drops after that.
  - Kirby64 2y ago
    And you're using far too strict of a definition of tax. Think of it another way: if I make $1, and the government takes $0.10, but then gives me back $0.05 later, but my rich neighbor who makes $10 the government takes $1 and he only gets back $0.10 later... how is my neighbor not taxed more (effectively) than me?

dmoy 2y ago

If we're being pedantic:. oasdi is extremely regressive (no tax at all above like 2x median household income, vs e.g. income taxes which continue ramping up until closer to 10x median income after becoming flat). Medicare tax is not capped, and is slightly progressive in that it jumps from 2.9% to (I forget like % higher) at somewhere around 3x median household income.

Jtsummers 2y ago
Ah, you're right about Medicare. Not sure where I got that it was capped from. An extra 0.9% for wages over $200k. But yeah, we agree, the individual I responded to is mistaken in calling OASDI a progressive tax. It's regressive since the rate drops.

Kirby64 2y ago

I mentioned the income cap. And no, that is not true. The benefit you get some social security is reduced substantially as you contribute to the upper end of the cap. You might be taxed less proportionally once you exceed the cap but also don’t receive more benefits. The benefits you receive in retirement when drawing on social security are proportionally less. For example (a few scenarios I ran here) with a “full retirement age” set to 2035 (when you’d be 67) If you earned a constant wage of $50k/yr, you would be able to draw $2044/mo in SS. Tax per year would be 6.2%, or $3100/yr. If you earned a constant wage of $150k/yr, you would be able to draw $3843/mo. Tax per year would be $9300/yr. You receive about 88% more benefits but contribute 300% more money. How is that not progressive taxation?

Jtsummers 2y ago
You're using the term "progressive tax" to talk about the benefit or return, which is not what it actually means. Progressive, flat, and regressive taxes are not about how the money gets used or redistributed. It's a simple thing: Is the tax rate constant across all incomes? Flat. Does the tax rate increase as income increases? Progressive. Does the tax rate decrease as income increases? Regressive. OASDI is a regressive tax. Flat for the first $176k, then drops after that.
- Kirby64 2y ago
  And you're using far too strict of a definition of tax. Think of it another way: if I make $1, and the government takes $0.10, but then gives me back $0.05 later, but my rich neighbor who makes $10 the government takes $1 and he only gets back $0.10 later... how is my neighbor not taxed more (effectively) than me?