How would Sensible Tax Reform affect Social Security and Medicare taxes for individuals?
Social Security and Medicare taxes are the most regressive taxes which most Americans pay. Even kids working in a fast-food restaurant must pay 6.20% of their earnings for Social Security (and another 1.45% for Medicare for a total of 7.65%)–from the very first dollar they earn. Those taxes are not only nonrefundable but they are not even tax deductible. Someone earning $100,000 pays $6200 in Social Security taxes and $1450 in Medicare taxes. Employees (as well as their employers) pay the full 7.65% up to a maximum income of $102,000 (2008). However, the Social Security tax (6.20%) ends at that level, leaving only the 1.45% of Medicare taxes for higher wages. Thus, someone earning $1 million or even $50 million pays only $6324 in Social Security taxes–just $124 more than does the worker earning $100,000. For someone with $1 million of earned income, the average combined tax rate is only 2.08%–versus 7.65% for the kid flipping hamburgers or the family at the poverty level. That is ve
