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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]I think that the previous poster does not believe there is a meaningful difference between payroll tax and income tax.  It still affects your disposable income, regardless of what it is called.  I think she adequately acknowledged the technical distinction when she called these taxes "de facto" income taxes.  She just does not believe it is meaningful.

You might argue that it does not matter whether Mitt Romney paid tax on earned income vs. capital gains, as long as he pays taxes.  Same logic.[/quote]

Everyone who is an employee pays payroll taxes. Most people, additionally, pay income taxes, while some don't. [b]And funding for many public goods depends on income, not payroll, taxes[/b]. So, the distinction is pretty important. If we're talking income taxes, that's what we are talking about, and mixing that with payroll taxes is not that fruitful.

Btw, I do agree that there's more important fish to fry, but we can not ignore significant parts of reality.[/quote]

And that's where you are wrong. That's the way it is SUPPOSED to work, but it's not the way it ACTUALLY works.

The U.S. spends more than $3 trillion a year.

It collects $1.16 trillion from INCOME taxes
It collects $824 billion from PAYROLL taxes.

The deficit is a bit north of $1 trillion. Without the payroll taxes it would be more like $2 trillion.

Stats: http://www.irs.gov/taxstats/article/0,,id=102886,00.html

Those $824 billion in payroll taxes are currently being used to pay for public goods. They are not locked up in some Social Security account. The distinction is NOT very important.

In any case, harping on the fact that 46% of Americans don't pay income taxes is the wrong issue. Those 46% don't pay [i]because they are too poor[/i] not because they're somehow using sophisticated accounting techniques to dodge an obligation. The fact that such a large proportion of our country [i]is too poor[/i] to pay income taxes is a bigger policy issue than who's paying what type of tax.

Furthermore, it's not true to suggest that the payroll tax burden is an equal burden for higher earners. The SS cap makes it a diminishing concern for people who earn, say $500,000 a year in salary. They stop paying the SS portion of FICA by around March or April.[/quote]

Thank you for the additional data, but I would challenge a few points:

1) Under what definition of "poor" can one say that 46% of all citizens are "too poor" to pay income taxes?

2) You outline above the revenues collected. I don't see there the current and future expenditures that those revenues are supposed to fund. Do you have those numbers? Those $824 billion are NOT used to pay for public goods; net net they are used to bring benefits to individuals who earned payroll-related benefits (true,  benefits are deferred and pooled, but so what). In other words, if you have $824 billion in payroll taxes, but also $824 billion in payroll-related expenditures like SS, current and future, you cannot say that those $824 billion are devoted to public goods like infrastructure, education, state department...

3) The employee portion of the payroll tax is 6.2%, whereas all income tax rates are higher, so I don't see how one can argue that somehow paying payroll taxes more or less equals paying payroll + income.

My main point here is that this famous 46% is to a large extent a result of policy choices (exacerbated by the economic crisis we live in), and that I question the wisdom of such policy. As just one example of the many policies that should be reevaluated. [/quote]

Your points are fair, but I would rebut this way:

1) Right now you basically don't start paying income taxes as a family of four until you earn around $30,000 (as a renter). Homeowners, of course, may be slightly higher. I don't know if you consider that to be low income or not, but I do. I get the $30,000 by taking the standard deduction ($11,700, married filing jointly) plus four personal exemptions (3,800 a piece) plus the value of two child credits.

2) Yes, there are future liabilities for Medicare and Social Security. Clearly. but that doesn't change the fact that the government would not operate in the here and now were it not for payroll taxes. I'm not really arguing that more shouldn't pay -- I agree with you there. I just don't think the 46% figure says what you think it does, and I think it's wrong to discount the payroll tax.

3) Highest earners clearly have the most capacity to pay more and are being taxed at historically low rates. Start there. Then figure out how to get middle income people back into the system. There's not much to be gained from taxing corporations, either.[/quote]

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