Payroll tax is regressive

There has been some confusion about this on blogs, television shows and in emails that at least three people sent me following the New Hampshire Democratic debate on Wednesday. 

What is the payroll tax, otherwise known as the Social Security tax?

Everyone pays 6.2% tax on all income up to $97,000.  In other words, someone making $50,000 in a year would watch 6.2% of it go to taxes.  Someone making $70,000 would also watch 6.2% go to taxes.  However, someone making above the $97,000 threshold would only pay a 6.2% tax on their income up to $97,000 -- the rest of the money would not be subject to the tax.

This means everyone making less than $97,000 per year would see a higher percentage of their salary disappear in taxes than those making above that mark.  Therefore, by definition, the tax is regressive.

Comments

[Robt]

Consider,

" No Taxes on anyovertime pay ".

Employees forced to working long hours because companies have downsized the workforce to save on health benefits then force overtime 24/7 with searing attendance policies that assist in the enforced overtime.

So when a working stiff is volunteering to work OT to make ends meet or is forced because of down right sizing the work force. Make this overtime earnings tax exempt.....................

[granny]

...Or, how about employer pays all taxes on overtime work. Worker ought to get SS credit for OT.

[Robt]

Granny,
As long as the employer doesn't reduce overtime pay per overtime hour to compensate.

But yes, that will work even though it continues a tax collection, that is shifted to the employer. Unlike not taxing overtime at all......No shifting of taxes due. Appeals to me more.

[granny]

What I was thinking, Robt., (and I am very weak on tax knowledge, so my thinking could be inaccurate) was that if the overtime work was not taxed at all, the worker would not get Social Security credit for work he/she performed. I felt - if you do the work, you are entitled to the credit to your SS quarters.

What do ya think?

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