2. Thursday, July 8, 2010 - 11:59 PM
I think the US tax rate is not progressive enough!
Let's say we had a flat rate tax of 25% for everybody - what would that mean? A person who earns $10,000 a year would pay $2,500 and have $7,500 left to eek out an existence. Somebody who earns $100,000 pays $25,000. Who do you think is hurt more by such a tax scheme and can barely survive?
There are many unavoidable fixed fees (e.g., car registration) and taxes (state sales taxes) already that take out a proportionally much bigger chunk out of small incomes while rich(er) people just shrug them off and pay them with their chump change.
A steeper progressive tax scheme with a top bracket of 45% or 50% for top earners would go a long way in reducing America's budget deficit and ultimately its huge debt.
Another flaw: In 2010, the Social Security Wage Base is $106,800 and the Social Security tax rate is 6.20% paid by the employee and 6.20% paid by the employer: A person with $10,000 of gross income will have $620.00 withheld as Social Security tax from his/her check, with the employer sending an additional $620.00. A person with $110,000 of gross income in 2010 incurs Social Security tax of $6,621.60 (resulting in an effective rate of approximately 6%, with $6,621.60 paid by the employer. A person earning a million dollars in wages will pay the same $6,621.60 in Social Security tax (resulting in an effective rate of approximately 0.66%), with similar employer matching. In this case, the tax is actually regressive - the more you make, the less you pay into the system - absolute lunacy! Anybody who wonders why Social Security is in trouble - look no further: do away with the taxable income cap!