I don't know why you are having such a hard time believing that figure. You really think you'd believe it if I could find a web page stating it? All you had to do was read that PDF and connect the dots.
120 million Americans who earn an income are outside the income tax system, that means they don't earn enough to pay income tax after all the deductions, that's 40% of all income earners. They are either not required to file or receive a refund in excess of their FICA payments.
That is in addition to those 26 million households who do not report an income at all.
Add in 41 billion dollars paid out for EIC in 2004 which wasn't reflected in that table due to the fact that the Tax Foundation considers it a welfare payment (to swell to 60 billion in 2008) and you have a serious portion of the country which does not contribute to the Federal coffers at all, neither on the FICA side nor the Federal income tax side.
Even if I was wrong about the 5%, and you were right, that the bottom half pays 18% of the total of employment taxes, FICA is still only a transfer payment, it doesn't support the government. Only 1% of FICA goes to overhead, the small surplus goes into Tbonds (is there somewhere else you think it should go?).
It can't and never does run the necessary departments of the federal government, it is simply transfered from one person to another, one family to another. Those who pay in the system in their youth eventually end up receiving the payouts. It isn't transfered from one static group to another static group because no group is static. If you were older you'd realise this.
You can bookmark this message and bludgeon me in a few years with it if I'm wrong but any attempts to raise FICA to include non-wage income or raise it to include the last dollar of income will fail to raise the FICA burden on that elusive top 1%, those we call rich, and attempts to do so will instead fall squarely on the same middle class everyone wants to save. When you don't need additional income to live, there are a lot of things you can do to have that income be unrealized and untaxable. Raising taxes on the rich has the usual effect, increasing the profitability of tax avoidance. |
