Ever since Ronald Reagan, on Alan Greenspan's advice, raised social security (FICA) taxes on the self-employed by 50% in 1984, the poor self-employed, while having enough deductions and exemptions to pay no income tax have been stuck with paying 14.1% of their business income on FICA taxes no matter if they were below the poverty line or not. Take my own case as an example. Here are my FICA taxes for years in which I paid no income tax:
|
Year |
Business Income |
Income Tax |
FICA Tax |
Poverty Line |
|
1998 |
$3358. |
0 |
$474. |
$8050. |
|
2002 |
$6995. |
0 |
$988. |
$8860. |
|
2004 |
$3666. |
0 |
$518. |
$9310 |
|
2005 |
$1764. |
0 |
$249. |
$9570. |
|
2007 |
$16350. |
0 |
$2310. |
$10,210. |
As can be plainly seen for four of the five years, I was clearly below the poverty line for an individual, yet I paid 14.1% of my income in FICA taxes. Self-employed people pay both the employer's and employee's share of FICA taxes. They pay at a nominal 15.3% rate, but the IRS in its infinite wisdom multiplies business income by 0.92 before taking the 15.3% making the FICA tax rate effectively 14.1%.
Fortunately, I have other income besides my self-employment income which brings me up way above the poverty line, but for the poor slobs with income and tax statistics such as the above and with no other source of income, they are paying through the nose in FICA taxes even if they have enough other tax write-offs and expenses to bring their net income tax down to zero. This is an example of how onerous and regressive FICA taxes really are for the self-employed. And Republicans claim they are supportive of small business. Phooey! Small business starts out with the self-employed and they are taxed to the hilt thanks to Alan Greenspan and Ronald Reagan.
Here is what Dr. Ravi Batra had to say:
The other reason [why George W Bush has destroyed 3 million manufacturing jobs] is a huge rise in taxes on small business. The Republicans are right when they say raising taxes kills the economy and jobs, but they forget that they are the ones who raised such taxes. This perhaps comes as a shock to you. What! The Republicans raising tax rates, and that too on small business? Nobody would believe that. Aren't they the party of tax cuts? They are, indeed, but only for the wealthy. They have crippled the small business person with the largest tax rise that occurred on self employment under President Reagan.
This is a good example of how tax money is redistributed from the poor to the wealthy. It would be one thing if all that money was going into the Social Security Trust Fund to be used when the baby boomers retired which was the advertised purpose. But no, that money taken from the poor was used to reduce taxes on the wealthy while not accruing as much of a deficit as would have accrued otherwise. Now that the baby boomers are actually starting to retire, the Republicans, instead of using all that money in the trust fund to pay their social security benefits, want to privatize social security on the grounds that the government can't afford to pay it any more especially if taxes have to be raised on the wealthy in order to pay it. So Americans have been bamboozled, and the self-employed in particular have been taken for a ride and carjacked!
Anyone below the poverty line should pay no FICA taxes at all! It is literally money taken out of the pockets of the poor which they cannot afford to pay. On a $7000. self-employment income the poor self-employed pay $1000 or one seventh of it to FICA taxes, and then there is no assurance that they will ever receive a payout in terms of social security especially if they are young, or they won't receive a payout until they are 70 or 75. They keep raising the retirement age, don't you know. So there is no respect for the fact that poor people have been paying this regressive tax for years in order that the rich can have their tax breaks. There is no social contract. Instead the poor are screwed in terms of the money they have to pay in and then they are screwed by being threatened with no social security in their old age.
The poor have been screwed with regressive taxes for 30 years or more. Now that it is coming time to pay the piper in terms of raising taxes on the wealthy to provide for the fact that money needs to be taken out of the social security trust fund to pay retirees, the deficit hawks don't want to raise taxes on the wealthy in order to do it. Why starting this year is social security adding to the deficit? Because the money coming into social security in terms of FICA taxes is less than the money being paid out to recipients. Until this year more money was coming in than was being paid out, and this excess was "borrowed" in order to reduce taxes on the wealthy. It just was used in the general fund instead of being put in a "lockbox" as Al Gore wanted to do. In place of the amounts borrowed special non-negotiable Treasury bonds (basically worthless IOUs) were placed in the social security trust fund to be redeemed, supposedly, when the payouts to recipients exceeded the income in terms of FICA taxes. That day has now arrived and, instead of Republicans gladly being willing to redeem those special Treasury bonds backed, supposedly, by the "full faith and credit of the American government," they want to privatize social security. In other words, as far as Republicans are concerned, the "full faith and credit of the American government" is a farce when it comes to the redemption of the $2.5 trillion in the social security trust fund. They used the excess when more was coming in than was going out to reduce taxes on the welathy; now they want to reneg, when more is going out than is coming in, because that would either increase the deficit or mean that taxes on the wealthy would have to be raised. It's that simple.
And court cases have established that American citizens have no direct claim on the monies they have contributed to the social security trust fund. This makes it possible that Republicans, by changing the rules on social security payouts, can bypass the necessity for ever paying out one dime of the monies in the social security trust fund that are backed (supposedly) by the "full faith and credit of the American government."
