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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: ahhaha who wrote (158464)	10/19/2008 4:06:54 PM
From: GraceZ	Read Replies (2) \| Respond to of 306849

FICA taxes went up as a percentage of total taxes, Well it isn't true. What did happen is that Federal taxes fell for the bottom half as well as for people like myself who usually reside in the middle, so the percentage of their Federal payments was comprised primarily of FICA. It stands to reason that if your Federal tax paid drops to near zero, your FICA comprises a higher percentage of your payment. Which is very different from saying FICA comprised a larger percentage of total tax receipts. The total FICA paid in by the bottom half is around 4-5%, with a very large majority paid in by the top two income quintiles. The Federal budget is almost 2 trillion and the SS surplus is only around 300-400 billion so it isn't like they can fund the government with FICA. Does that follow by any stretch of exaggeration? It is all a relative comparison, not an absolute measure and without a relative comparison you can't even say the middle and lower dropped. It has simply not risen as much as the top two quintiles. We still have great income mobility with people moving from one quintile to another throughout their lifetimes. As of last year, we, my husband and I, made it into all five quintiles over our working lifetimes. Frankly, you can have that top one because last year we paid more in Federal taxes than most individuals in the US will pay in their lifetimes due to a one time cap gain on sale of our RE investments. US still has great mobility, much more than the other more socialist developed countries but mobility cuts both ways. I think this is one of the reasons middle and upper middle class people are so angry all the time, because some naturally saw their incomes peak with their careers, others have moved up from the lower quintiles and taken their places. It's a deception to think that everyone stays either rich or poor throughout their lifetimes, because only a very small percentage of households remain static in any particular income quintile in any ten year period. Over the past 20 years or so, the bottom income quintile hasn't risen as much as the top but this is largely due to the fact that we basically have an immigration policy that prohibits immigration of high in demand knowledge workers and looks the other way when low skilled workers enter the country in droves. This drives up the salaries of the knowledge workers while putting a serious lid on the wages of the low skilled. We've become so highly specialized at the top that it is not unusual to see whole segments of highly trained individuals finding themselves needing to retrain for a different specialty several times in their lifetimes. Not everyone makes the adjustment or finds a new specialty that pays the same level. This happened to me, my skills as a photographic printer became obsolete and I had to start again in a new specialized but related field. The new specialty doesn't have the same level of compensation as the old because it is more competitive. It is more competitive because the capital equipment needed to do it is cheaper (lower barriers to entry) and easier for a less skilled operator to use. Good tax policy cannot change the pace of technological progress but bad policy can hinder the adjustment and get in the way of people doing what they need to do to adapt to those changes. Attempts to hang onto obsolete jobs by fiat as well as tax policies designed to transfer income from high producers to low producers always ends up making everyone poorer. They protect what will have to change eventually anyway. Almost nobody makes the painful adjustments they need to make until they are forced by necessity to do so.