Purposes of this blog are to facilitate timely updates of previously published articles on my two websites: uspublicpolicy.com and debtism.com.
An additional purpose is to provide a public forum for feedback to promote solutions to systemic defects in government, economic, tax and welfare policies.
Nice blog, Dad!
Hi, Congratulations to the site owner for this marvelous work you’ve done. It has lots of useful and interesting data.
Biz does NOT pay the matching cost of FICA taxation! The consumer pays it via purchasing the product. Biz forwards it. The bigger issue is that the consumer must pay 3-5x the actual cost of this 7.65% tax because biz passes the cost on to the next biz,and the next and on and on it goes doing nothing other than increasing the price every time the product is sold with the consumer paying for all even as biz struggles to be competitive on the world stage while paying/forwarding this idiotic round robin tax.
John. Have you ever looked into FICA,Unemp, taxation,and workers comp from the perspective of biz whereby these Gov mandated expenses are actually just 1 massive transaction tax paid VIA biz but paid for by the consumer many times over because of the transaction tax methodology? Biz passes the cost on and on in a cumulative manner so biz recoups the expense at great cost to the consumer, the economy and biz itself? Workers comp is a key player and VERY relative to this issue. Care to discuss? TY. RAY
I argue that FICA,the Unemployment tax,and all Gov mandated expenses to biz such as the W-comp premium are no different than having a massive transaction tax levied on virtually all sales transactions. Biz passes these costs on and on so both biz and the consumer end up paying FAR more via purchases made than biz actually forwards to pay the cost of these programs so how can these expenses not be viewed as extremely harmful T-taxes? Please consider this perspective carefully. Thank you.
Very informative post. Thank you.
Ray,
Sorry about the delayed response, but I have just moved from Tyler, Tx to a small private lake NW of Tyler and have been rehabilitating our retirement home. Your perspectives that the consumer ‘pays all’ is right on target and this ‘mess’ created by disingenuous legislation enacted since the last Great Depression is almost impossible to clean up. Absent a massive public uproar and class action lawsuits to repeal unconstitutional laws the “Legacy of Perpetual Debt” is a certainty.
There are practical means of restructuring public policies to achieve positive outcomes, but this will not happen until the masses learn they have been duped by massive ‘Ponzi’ schemes and throw out the bastards that have lead us to the abyss.
On that cheerful note, I wish you good luck!
John Koraska aka SargeK
Thank you for your generous comments.
Now that we have settled into our new home, I expect to write a few articles addressing the fallacies of recent (and pending) legislation
that magnify failed fiscal/monetary policies and will only accelerate the day of reckoning. Unsustainable debt, both public and private, remains the number one obstacle to achieving the American Dream. Since government is no longer responsive to the will of free people, it is incumbent on citizens to act in their own best interests to secure a brighter future for themselves and their heirs.
If I were a bit younger I would strongly consider learning a new language and moving to Brazil. I may make a small investment in a retirement site there just for the hell of it.
Thanks again,
John Koraska aka SargeK
Ray,
The Milton and Rose Friedman book “The Tyranny of the Status Quo” published in 1984 confirms the fact that corporations do not pay taxes – consumers do!
I wrote about this in article #4 on debtism.com website. http://debtism.com/social-security/eliminate-corporate-income-tax-art4.htm The article recommended replacing the Corporate Income Tax with a tax on gross corporate income. Following are extracts from that article:
Business Expense Deduction
Deduction of employee FICA and FIT Taxes as Wages
IRS Publication 535 (2004), Business Expenses
http://www.irs.gov/publications/p535/ch06.html
IRS QUOTE: 6. Taxes ….. Employment Taxes:
If you have employees, you must withhold various taxes from your employees’ pay. Most employers must withhold their employees’ share of social security and Medicare taxes along with state and federal income taxes. You may also need to pay certain employment taxes from your own funds. These include your share of social security and Medicare taxes as an employer, along with unemployment taxes.
You should treat the taxes you withhold from your employees’ pay as wages on your tax return. You can deduct the employment taxes you must pay from your own funds as taxes. Example provided by IRS (THINK ABOUT THIS): You pay your employee $18,000 a year. However, after you withhold various taxes, your employee receives $14,500. You also pay an additional $1,500 in employment taxes. You should deduct the full $18,000 as wages. You can deduct the $1,500 you pay from your own funds as taxes. UNQUOTE
How The IRS Utilizes “Reverse Accounting”
To reconcile the Gross Amounts of FICA taxes reported to the Social Security Administration with the Net Amounts of IRS tax collections the IRS has resorted to REVERSE ACCOUNTING!
This is footnote (5) to Table 1, discovered on page 41 of the Internal Revenue Service – 2003 Data Book. http://www.irs.gov/pub/irs-soi/03databk.pdf
Quote: “(5). Collections of individual income tax are not reported separately from Old-Age, Survivors, Disability, and Hospital Insurance (OASDHI) taxes on salaries and wages (under the Federal Insurance Contributions Act or FICA, and on self-employment income under the Self-Employment Insurance Contributions Act or SECA). The OASDHI tax collections and refunds shown in Table 1 are based on estimates made by the Secretary of the Treasury pursuant to the provisions of Section 201(a) of the Social Security Act as amended and include all OASDHI taxes. Amounts shown for the two categories of individual income tax were derived by subtracting the OASDHI tax estimates from the combined total collections for the two taxes (refund estimates were not made for these two categories).” Unquote
To reconcile the shortage of net IRS FICA collections with the gross contributions reported by the Social Security Administration, the US Treasury simply totals up FIT & FICA collections, subtracts the FICA tax from the total and calls the remainder “Individual Income Tax”. This dubious technique of “reverse accounting” provides a convenient, but highly questionable means of complying with the law that states: “Social security (OASDHI) (FICA-contributions) income taxes can only be spent on Social Security and Medicare.
While IRS rules and footnotes confirms that the FICA (OASDHI) tax is just another exclusive “income tax” on wages; both the IRS and the SSA continue to label the FICA income tax as a “Contribution”. Even more interesting is the revelation of how the US Treasury reconciles the $100s of billions of reported FICA taxes not collected by the IRS (due to EMPLOYER Business Expensing of Wages & Employment taxes, withheld from workers paychecks) on government balance sheets.
2% Corporate Gross Revenue Tax (CGRT)
A possible solution to this apparent contradiction in tax rates and net taxes paid; is to simply eliminate the corporate income tax and replace it with a 2% Corporate Gross Revenue Tax (CGRT). Treasury receipts from the new tax would more than double alleged income now reported and eliminate business tax deductions and credits of questionable merit. Efficiencies of corporate tax simplification would likely offset nets costs of the new tax by significant manpower reductions in government and corporate bureaucracies.
A CGRT is obviously less onerous on the government and the corporations. Think of the billions of talented man-hours that could be redirected toward purposes that are more productive if the corporate income tax was eliminated. With CGRT the government would no longer be subsidizing corporate jets and corporate welfare. Devoting more time to business and less time to tax compliance would reward corporations. They would also enjoy less government intrusions into their businesses.
By far, the most significant result of eliminating the Corporate Income Tax is the expected huge increase in government revenues. This would occur because Business expensing of wages (that include a FIT and FICA - taxes) would no longer be allowed or necessary. Deductions of Interest Costs would also be discontinued thus removing the tax incentive toward debt (often at odds with traditional capital formation).
Leveling the tax burden on various, income sources (dividends, wages, and interest income) would also be a welcome change, but that is an unlikely to happen unless workers unite and demand it.
Summary
Any fair tax system should treat similar net incomes (regardless of source) with similar rates. All tax laws should consider the impact of inflation on income and should be indexed to an appropriate standard measure before taxes are calculated. This would reduce the incentives for government to use inflation to pay down debt with cheaper dollars. A return to the Gold Standard would also reduce much of the political mischief and misdeeds that have occurred.
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