Posted on 10/17/2011 1:52:25 PM PDT by SeekAndFind
Not really. If you have self-employment tax you get an adjustment on the front side of 1040 for half the amount you enter on Schedule C.
The situation described in the article is correct...to an extent. The following is from Circular E.
"The 2011 employee tax rate for social security is 4.2%. The 2011 employer tax rate for social security is 6.2% (10.4% total). The 2011 wage base limit is $106,800, unchanged from 2010. The 2011 employee tax rate for Medicare is 1.45%. The 2011 employer tax rate is also 1.45% (2.9% total). There is no wage limit for Medicare tax; all covered wages are subject to Medicare tax."
Thus, he is not quite correct. The employee total contribution is capped at $ 4,485.60 for SS with no cap for Medicare (1.45%). So, how much is the combination? Depends.
You pay half and your employer pays half.
If your employer didn’t have to pay it, you would receive it in wages.
For TY2012 FICA is 12.4% (both halves) and Medicare is 2.9%, total 15.3% for payroll. For a self-employed plumber in California who earns $70K, if you include all combined payroll and income taxes (FICA, Medicare, state, federal), the effective marginal income tax rate is 12.4%+2.9%+10.3%+28% = 53.6%.
“Payroll tax generally refers to two different kinds of similar taxes. The first kind is a tax that employers are required to withhold from employees’ wages, also known as withholding tax, pay-as-you-earn tax (PAYE), or pay-as-you-go tax (PAYG). The second kind is a tax that is paid from the employer’s own funds and that is directly related to employing a worker, which can consist of a fixed charge or be proportionally linked to an employee’s pay.” wikijunk
Correct. But it doesn’t amount to much off the total pain. And it’s one of a bazillion weird IRS adjustments, isn’t it?
The Current Tax Code vs. Herman Cain’s 999 Plan
Base income
Now = $40000
999 = $40000
Amount spent on non-taxable items = $15000
Amount not spent (put in savings) = $3000
Amount donated to charity = $1000
999 sales tax rate = 9%
999 income tax rate = 9%
Federal taxes
Sales tax = $1444
Income tax = $3510
Total federal taxes = $4954
999 after tax income = $35046
999 effective tax rate = 12.39%
The 15.3% payroll tax is eliminated under the 999 plan. If you get a paycheck from an employer, then your employer pays half of your payroll taxes behind the scenes. It’s part of your pay that’s hidden from you in the current system. It is possible that your take home pay will go up under the 9-9-9 plan by 7.65%. If you checked yes on the calculator, it was added to your current income number (which is why the 999 income number is higher).
Remember, that money spent on things like a mortgage payment, rent, utilities, etc are not taxed as a sale. So, money you do not spend on over the counter purchases DO NOT incur the 9% sales tax, just the 9% earnings tax.
are you tring to freez a picture at an instant in time of what one would pay now and immediately under 999?
999 is not just an immediate proposal it is phase 1 of 2 phase plan. One must consider not just how much someone would pay in taxes, but how far what they had left would go. So if you spend every cent you make you will pay a federal (and in most states a state tax) for purchases of new items or services. (used are exempt) If you save for the future, you dont pay a federal sales tax only and income tax.
here is acalculator that might give a little info-caveat i dont know its veracity. I do know immediate taxes paid is only a small part of the plan, the economy will take off there will be 6 million new jobs your children will have a better prospects for a prosperous future than under current socialistic plans. If no changes are made do you think SS will be there for you and your children? This plan replaces the hidden taxes and increases the number of taxpayers from 50% to 100% . Yes some on the lower income levels may have to pay a little taxes, but consumer goods prices should come down also. Isnt it fairer to all that all pay something? It also takes the power away form Congress and gives it to the people where it belongs.
http://www.nerds4cain.com/Blog/archives/723
It seems that 15.3% figure is not far from the mark.
In this case, they won't allow Cain to include the employer's share of FICA and Medicare payroll tax in the cost of employment.
It costs the employer 107.65% of the employee's salary to pay salary and payroll tax for the employee. 7.65% of the salary goes straight to the government as the employer's share. The employer deducts another 7.65% of the salary for the employee's share of payroll taxes. Then deductions are made for income tax, medical insurance, 401k’s, etc., leaving quite a hole in the original salary. But 15.3% of the salary goes to the government.
Politifact is not a reliable source for determining truth.
RE: Amount spent on non-taxable items = $15000
What are these non-taxable items that a family making $40,000 in income would be spending $15,000 on? Could you give us some examples?
What items are NON-TAXABLE?
Did Cain give us any indication of what they are?
>>So most workers see only about half the amount Cain mentioned deducted from their paychecks.
And that is the problem! People actually believe that employers pay their payroll taxes and other benefits out of the goodness of their hearts. All of that is COMPENSATION....for your WORK (i.e. hours of your life that you will NEVER get back!). The FedGov has created a nation of fools who believe that a tax refund is like found money and that money deducted from your check was never yours to begin with.
We need a tax where everyone pays and everyone can see the full amount they pay so they can be mad, really freaking’ MAD, when they see how much of their life is spent paying for stupid “programs” and giveaways for political cronies and enemy nations.
Quite.
ML/NJ
Politifact is the demon spawn of the commie rag the St. Petersburg Times, or Pravda West as we like to call it.
They practically swallow their tongues any time they have to rate a Conservative FACT.
But for the temporary vote buying scheme reducing them by 2% this year, the payroll tax is indeed 15%.
ObamaCare calls for the TY2013 Medicare Insurance Tax top rate to go to 3.8%.
The kicker is that the new 3.8% rate includes not just payroll but all income, including all investment income.
Rent, a mortgage, utility bills, a car payment, school tuition, daycare, the list goes on.
RE: Another freeper spreading liberal lies about Cain?
Another FReeper who does not differentiate someone posting an article for discussion/debate/refutation and education purposes and someone who allegedly support liberal lies.
Listen, if you want to refute the so called lies, please do it, that’s the reason why I posted the article in the first palce.
Please don’t get personal with posters.
But Cain is a mathematician and rocket scientist . . . in an alternative universe.
Or maybe he's actually a virtual candidate visiting us from Sim City where the default tax rate is 9-9-9 and the pizzas all have extra toppings.
Or the employer could just keep it. As the article states, there's nothing that will compel them to pass that money along, and when they suddenly enjoy a windfall to their bottom line that comes from having their payroll costs go down by several percent, it's going to be hard for them to give it up.
It's similar to the offshoring of manufacturing. A hiking boot company changed their production from Italy to China a few years ago. Their labor costs dropped considerably. Has the customer reaped any benefit? Just the opposite: the price has remained the same while the quality has suffered. Eventually the brand equity they built up over years will erode, but in the meantime their stockholders and senior executives will cash in.
ML/NJ
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