It would show explicitly that income was calculated the same way for both employed and self-employed, and that the FICA tax rate is also identical.
You should do the math before you start correcting mine. As is implied in your statements above this, the only way two individuals with the same gross income have identical FICA burdens is if the employed person has a higher income than the self-employed individual to account for the employer paid half. Now the math question of the day is, by what percentage does the employed person's wages have to rise to have an identical FICA burden as the self employed person?
Hint: In the zero bracket the self employed person pays 100% of the 15.3% while someone in the 28% percent bracket pays only 73% of it even though in all cases 100% of the FICA payment is attributed to the FICA portion of federal receipts.
The amounts paid by the employer, on behalf of the employee are amounts that are essentially untaxed compensation. That is the best "deduction" in town to have!
So somewhere around 20% of FICA taxes is paid by the bottom 50% of households.
I'm not too surprised you didn't take it one step further and lump it with their income tax payments but shouldn't you, considering your original reply to me implied that FICA was just like any other Federal tax and should be treated as such?
In 2004 FICA was 40% of all Federal taxes collected so 20% (your calculation) of 40% equals .8%. So FICA adds less than a percent to the bottom half share of the Federal burden. I'm guessing this is why I incorrectly remembered that 5% figure, because I knew that adding back in FICA only had a very small effect in raising the bottom half share of Federal wage/income/FICA tax. My bad for saying 5% of FICA, what I should have said was 5% of income tax plus FICA. Incidentally they had about 17-18% of total income.
Excise and corporate raise that small percentage up somewhat because unlike income tax, FICA, and corporate, Federal excise taxes are distinctly regressive. IOW they have a much higher effective rate in the lower income brackets than they have in the top. This is one of the reasons we'll never replace income tax with a consumption based tax.
The xls supplemental tables attached to that link are the most interesting of all. You should spend some time going back to look at them. If you follow the data from 1979 forward to 2004, you can see that as effective tax rates fell across the board for all quintiles (most recently after the Bush cuts) the first four quintiles shares of Federal burden dropped along with their effective rates, all except for the top quintile whose share rose significantly. As effective rates fell on the top 20%, 10%, 5% and 1% their share of Federal burden rose progressively higher with only a few counter trend wiggles.
Maybe the real question to ask is why is it that we have Federal spending which is so heavily dependent on what the richest 10% will bear to pay instead of spending based on what the median is willing to pay? The answer is in those transfer payments. |
