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The Federal Insurance Contributions Act tax:

Otherwise known as the FICA Tax  (or more colloquially as the Payroll Tax).  

If you "earn income" through means other than a weekly paycheck for hourly wages, then this Payroll Tax, this quaint, Society-building, people-protecting Tax most likely does not apply to you. ... SO carry on, with your well-funded campaigns to Cut Entitlements.

If not, if YOU are among the vast majority of us, scrabbling out a living in the "working class" tier of Society ... you might want to take a glance at this brief FICA history, and get up to speed -- your Retirement well-being may well depend on it ... on us workers being well-versed in what We've Earned.  

According to current Law.   Before they diminish it, to our Nation's great detriment.

As much as the GOP and the Tea Party tends to romanticize it -- quite often, for those who actually lived through them, the "good old days" (before the New Deal), weren't all that good.

At least not for vast majority of us, who actually "had to work" for a living ... pre-FICA insurance, that is.

Federal Insurance Contributions Act tax
From Wikipedia

Federal Insurance Contributions Act (FICA) tax ˈfaɪkə is a United States Federal payroll (or employment) tax[1] imposed on both employees and employers to fund Social Security and Medicare[2] -- federal programs that provide benefits for retirees, the disabled, and children of deceased workers. Social Security benefits include old-age, survivors, and disability insurance (OASDI); Medicare provides hospital insurance benefits for the elderly. The amount that one pays in payroll taxes throughout one's working career is associated indirectly with the social security benefits annuity that one receives as a retiree. [...]


Historical payroll tax rates for Social Security (blue), Medicare (red) and total (purple). The tax rates shown include both employee and employer contributions.[18]

Prior to the Great Depression, the following presented difficulties for working-class Americans: [19]

 --  The U.S. had no federal-government-mandated retirement savings; consequently, for those people who had not voluntarily saved money throughout their working lives, the end of their work careers was the end of all income.

  --  Similarly, the U.S. had no federal-government-mandated disability income insurance to provide for citizens disabled by injuries (of any kind -- non-work-related); consequently, for most people, a disabling injury meant no more income (since most people have little to no income except earned income from work).

  --  In addition, there was no federal-government-mandated disability income insurance to provide for people unable to ever work during their lives, such as anyone born with severe mental retardation.

  --  Further, the U.S. had no federal-government-mandated health insurance for the elderly; consequently, for many people, the end of their work careers was the end of their ability to pay for medical care.

In the 1930s, the New Deal introduced Social Security to rectify the first three problems (retirement, injury-induced disability, or congenital disability). It introduced the FICA tax as the means to pay for Social Security.

In the 1960s, Medicare was introduced to rectify the fourth problem (health care for the elderly). The FICA tax was increased in order to pay for this expense.

In December 2010, as part of the legislation that extended the Bush tax cuts (called the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the government negotiated a temporary, one-year reduction in the FICA payroll tax. In February 2012, the tax cut was extended for another year.[20]

File: Historical Payroll Tax Rates.jpg -- From Wikipedia, Creative Commons

Hey, Did Inflation suddenly stop in the 1990's -- especially inflation on Health Care?

File: Share of Federal Revenue from Different Tax Sources (Individual, Payroll, and Corporate) 1950 - 2010.gif -- From Wikipedia, Creative Commons

Say, Did Corporations finally abandoned their responsibility to Society -- even though they profit from Societal services on an on-going basis?

File: Effective Payroll Tax rate for Different Income Percentiles (2010).gif -- From Wikipedia, Creative Commons

Question, What about those purple bars at the right side of the chart -- shouldn't they be taller? ... I would hazard a guess, that those income groups can afford it! (especially if us "worker bees" can.)

Historical Social Security and FICA Tax Rates for a Family of Four -- Data Tables

If we (the societal "we") don't start taking an active interest in the FICA tax applicability as a means for paying for cost increases (especially in Medicare) -- then they (as in the Tax-hating ideological "they") will end up breaking this "historic" Societal Deal our Nation once made with its with workers ... "as something that we can just no longer afford."

Because the rally cry of those who hate "big government taxes" is to return us to a time when:

"You're on your own. ... Better learn to swim, or else you'll sink like a stone."
C'est la vie ... Caveat emptor ... Qu'ils mangent de la brioche;

aka. Let them eat cake.  The Lake's not that deep.

Grab an Oar ... Or be handed the Anchor.  

It's OUR Societal Future, in their dismantle-government cross-winds.

Originally posted to Digging up those Facts ... for over 8 years. on Sat Oct 26, 2013 at 04:33 PM PDT.

Also republished by Social Security Defenders.

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Comment Preferences

  •  Great job of 'splainin' (2+ / 0-)
    Recommended by:
    jamess, oldpotsmuggler

    the positive effects of such a hated and misunderstood tax.

  •  Jamess - always an excellent read. (7+ / 0-)

    Bu to make those purple bars on the right taller, we'd have to apply payroll taxes to income earned from capital, and Social Security is not insurance for earners from capital, its wage insurance. Income  taxes are the way to go,  top effective income tax rates need to go up, adding 6 to 10 more brackets.... something like this

    41%-2 million

    This might actually return effective progressivity to the income tax system.

    On the other hand in 1984 the income cap on FICA was 90%, today its about 86%. Raising the cap back to 90% would mean a considerable COLA type increase. My back of my pants calculator says $3,500 to $4,500 at max and $1,500 to $2,000 for the average retiree.

    If we (the societal "we") don't start taking an active interest in the FICA tax applicability
    Absolutely spot on dude

    .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

    by Roger Fox on Sat Oct 26, 2013 at 05:19:19 PM PDT

    •  thank Roger Fox (5+ / 0-)

      Capital gains earners, should have to pay their "fair share, too.

      •  Higher effective tax rates on the rich (3+ / 0-)
        Recommended by:
        oldpotsmuggler, jamess, BusyinCA

        create a more balanced and stable economy, less income disparity and fewer, shallower and shorter economic downturns.

        For me, I dont buy the fair share meme, I just want an economy that doesnt crash every 20 yrs and has a recession every 5 years that displaces 15% to 30% of workers.

        .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Sat Oct 26, 2013 at 06:08:52 PM PDT

        [ Parent ]

      •  Cap gains tax used to be 28-30% (2+ / 0-)
        Recommended by:
        oldpotsmuggler, BusyinCA

        ITs what--- 15% now,,,,, erf...

        .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

        by Roger Fox on Sat Oct 26, 2013 at 06:11:15 PM PDT

        [ Parent ]

        •  25% at the top, so 30-ish to 35-ish (0+ / 0-)

          depending on the state.

          •  Fed Cap gains @25%? I cant find that data (0+ / 0-)

            Maybe you could lend a hand to a brother? And find and post a reasonable citation.....

            The short-term holding period is one year or less. Short-term capital gains are taxed at ordinary income tax rates, which range from 10% to 39.6% for the year 2013.

            The long-term holding period is more than one year. Long-term capital gains are taxed at long-term capital gains rates, which is usually less than ordinary tax rates. The long-term capital gains tax rate is either zero percent, 15%, or 20%, depending on your marginal tax bracket.

            In addition, high income taxpayers may have a 3.8% unearned income Medicare contribution tax applied to their capital gains and other net investment income. Thus the highest tax rate that could apply to capital gains income is 39.6+3.8= 43.4% on short term gains taxed at ordinary rates or 23.8% (20% + 3.8%) on long-term gains.



            .................expect us......................... FDR 9-23-33, "If we cannot do this one way, we will do it another way. But do it we will.

            by Roger Fox on Sat Oct 26, 2013 at 06:39:21 PM PDT

            [ Parent ]

  •  I freely admit to closing myself up (6+ / 0-)

    into a protective turtle-like shell nowadays.
    I can barely hold a conversation with people who have been indoctrinated by Rush, Beck and Fox News.
    It's like they completely forgot their former lives, and the lives of their parents and g'parents.
    It is now all Second Amendment rights all the time, and "Constitutionalists" like Cruz, and Obama dictatorship...
    I wok for folks too poor to afford an attorney, and work for folks who could hire 50 attorneys.
    I have two independant process server/private investigors that I use all the time who are smart, capable, and I cannot get beyond a chat about the weather with either of them.
    They would call this info out as communism.  And fabricated.
    They do not accept facts.  Facts are some fucking agenda of the leftists.

  •  FICA does apply to more (5+ / 0-)

    than just "a weekly paycheck for hourly wages".  It also applies to all salaried employees, employees paid by commission or piece work, or any other method of computation, irrespective of how often they get paid.

  •  A good summary. (3+ / 0-)
    Recommended by:
    VeggiElaine, jamess, BusyinCA

    But, I think we have to change the frame for all discussion of federal taxes.
    Just as our discussion of Congress has been shifted from the unspecific "corrupt" and "politics as usual," which left citizens with a feeling of hopelessness, to the more precise "extortion," hostage taking" and "terrorists," the terminology we deploy in talking about federal taxes (state and local are in a different category) has to change from a purposeful or intentional perspective (what someone wants to accomplish) to a practical descritpion of what they actually do.
    Moreover, to do that, we have to pay attention to the direction of flow. Currency is called that because, like the current in a stream, currency moves or flows through the community in a particular direction, or it should. Ideally and practically speaking, dollars move out from the Treasury and taxes bring them back, as revenue. That is, the initial direction is reversed for the simple purpose of bringing the dollars back, so we don't keep having to make more. I said, "ideally," because that is how it is supposed to work. That it doesn't is Congress' fault. Instead of directing the current directly into the community, Congress has diverted the flow, via the Federal Reserve, to the banks and Wall Street to provide the speculators and investors with an initial "cut" (interest and dividends) by lending the dollars back to create the national debt and to enable Congress to argue that only what comes back from other sources (revenue) can be sent out again to pay for necessary functions and projects.
    The result of this diversion or perverse behavior by Congress is that while there are more and more dollars in the community, they do not circulate freely and individuals see less and less, down from a trickle to a drip. Which the recent shutdown sought to shut off entirely.
    The rate of flow of our currency is referred to as its velocity and the velocity has been tracked by the Federal Reserve since the 1950s. As you can see from this chart, the rate as been steadily decreasing as if the stream had been dammed and the water backed up into a swamp where it becomes stagnant and breeds mosquitos.

    What Congress resents about the FICA is that, other than fiddling with the rates and who pays, Congress cannot divert the flow. Dollars flow directly from the Treasury into individual accounts to be dispensed for real goods and services. In other words, Congress is precluded from deploying these dollars as a tool with which to threaten the electorate with punitive actions, if they don't vote right. Which does not prevent them from trying their best to scare people by fiddling with the retirement age.

    Long story short, Congress aims to deprive people of their rights by shutting off the flow of dollars.
    Intent does matter when someone has the means.

  •  The word "Insurance" is in all those programs (2+ / 0-)
    Recommended by:
    jamess, BusyinCA

    Here's what has corporate balls boiling:  SSI, SSDI, Medicare, Medicaid programs are all not-for-profit single-payer insurance programs.

    Social Security has a $2.++ Trillion surplus, even after the payroll tax break (which, I theorize, was designed to decrease the Soc Sec savings and make the dire predictions of "Soc Sec will be broke" which they hoped would coerce the low-information and senile voters into "investing" in Casino Wall Street for their retirement money)!!!

    Casino Wall Street and For-Profit Corporate (Legal Personhood) Insurance programs want that money so they can send it to offshore accounts and give their CEOs huge yearly bonuses to the tune of millions, maybe even billions.  Maybe even a few million will find its way into campaign coffers of various legislators.  Congress Critters and $COTU$ justices need to wear jackets with corporate logos on them so we know who's bribing them.

    Take all that money out of circulation when our retirement and disability and medical insurance program funds disappear into the black hole maw of corporate greed... then what?

    The prez & Congress Critters did not even consider a not-for-profit single-payer insurance program once they got elected in '08.  They immediately met with insurance, medical, and pharmaceutical corporations to write legislation based on Medicare Part D (corporate prescription insurance which told SSI & SSDI recipients "buy this for-profit prescription insurance or else."  Or else doesn't have any teeth (forcing citizens to contribute to corporate profits is almost certainly unconstitutional, but it took $COTU$ no time at all to declare forcing Obamacare enrolees to "pay for for-profit insurance or pay a fine of $1000" and magico-presto, with their words make the premiums and the fine a "tax" - and therefore "constitutional").  Each side blamed the other and came up with "there aren't enough votes for a not-for-profit single-payer plan."  Bullshite.  They didn't even do a poll on it.

    I call the whole thing questionably legal blackmail (and I think it is unconstitutional, no matter what kind of legal mumbo-jumbo $COTU$ came up with to justify it).

    By far the easiest thing to do to solve the medical insurance dilemma would be to remove the profitable Medicare Part D, put prescription insurance under the not-for-profit single-payer part of Medicare as Part C to round out the not-for-profit single payer part of Part A and Part B, and open Medicare up for everyone to buy into..., and add dentistry and optical services to Medicare.

    The future of record-setting profits for insurance, medical, and pharmaceutical corporations looks bright for record-setting profits and executive bonuses.

    Our futures as our money disappears into the black hole of corporate profits...?

    Not so much.

    One of the saddest genealogy documents I found not too long ago is the form admitting one of my 19th century Alsatian immigrant ancestors into the poor house when he was an advanced age; his son is the one who admitted him.  Likely he died there because he didn't show up on the next census rolls while his son and family had moved to an adjoining county by the next census.  I wept for my gr-gr-grandfather's fate since the county poor house was the nearest thing to an old age home at the time.

    If Casino Wall Street and Corporations take all our money, I'm afraid we'll go back to a system where we have poor houses in this country again.

    I'm sick of attempts to steer this nation from principles evolved in The Age of Reason to hallucinations derived from illiterate herdsmen. ~ Crashing Vor

    by NonnyO on Sun Oct 27, 2013 at 05:26:57 AM PDT

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