>On Behalf Of Max Sawicky
>Fourth, we have an Earned Income
> Tax credit, the base for which is the same
> as that for the payroll tax, so there is already
> an offset to the payroll tax for those with incomes
> below $30K or so.
> I am glad to see everybody against means-testing.
> But consistency would dictate that you should then
> stop criticizing the 'regressive' payroll tax.
Since I didn't attack means-testing across the board, I guess I can still
attack FICA as a terrible, regressive tax. Yes, the Earned Income Tax
Credit is an offset against it. Which means during the phaseout of EITC,
for those making above $13,000 per year with a couple of kids, they face
something like a 35% tax rate from FICA plus EITC phaseout on all additional
income, plus whatever income tax they may be paying. This means a
low-income person can easily be phasing a marginal tax rate of 50% on new
income, then they of course pay regressive taxes on purchases under most
state sales taxes. (in the good state of Texas, Citizens for Tax Justice
estimates local taxes as 17% of low-wage earners income).
This is an unbelievably regressive tax system for the working poor, yet
Congress decides to keep the EITC phaseout, while abolishing the earnings
disincentive for high-income retirees? So damn consistency, this decision
by the Dems is a capitulation on every measure of fairness and
progressivity.
And remember, for those without kids, they basically don't get the EITC, so
that 15% tax on wages is added directly to their 15% tax on new income
(since they don't get any of those nice income tax deductions either), so
single low-income wage earners face a 30% tax rate on their wages, while
Bill Gates faces a 20% tax rate on his income from capital gains on his
stock investments.
> " . . Worse, if this reform encourages a lot more upper-income
> folks to keep
> working into their late 60s, it will create broader political support for
> increasing the retirement age, . . . "
>
> Not necessarily. If you can get benefits and work after
> the "retirement" age, you should want to lower the retirement
> age, not raise it.
For those not in the 65-69 age window, seeing a bunch of folks working and
picking up a check at the same time will make many of them think that
raising the retirement age is a good option, especially if it comes up in a
few years during a general budget crisis when it's on the table versus other
options.
Bad, regressive change all around.
-- Nathan Newman
