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Why is every single penny I make subject to FICA as an average wage earner in the US, but a person making 200k a year is "off the hook" at a maximum FICA tax of $6,045?
So essentially, if I make 40K a year, my FICA tax rate is 6.2%, but someone making $200,000 is paying 3.02% in FICA taxes.
Then we get into consumption:
Does a family making 300k a year actually spend 6.7 times more than a family making 45K?
Let's look at food in the example. Let's say the average family spends 700 dollars a month on food making 45k. Does it necessarily follow that a family making 300k a year spends 5000 dollars a month on food?
They probably spend more, but how much more? Let's say they spend 3 times what the average family does on food alone. We'll say $2100. So now 8.4% of their income is spent on food, whereas the average family spends 18.6% of their income on food.
The fact is there ARE upper limits to most consumption. Yes, there are some very rich people who are spending sums undreamed of by the regular person for jewelry or designer clothes.
But what are they spending on things like food, medicine, utilities, gas?
Does a person making 300k a year pay more for a cellphone with unlimited minutes than a person making 45k?
Do they necessarily spend more money on gasoline? If I have a 20 mile commute at 45k from my humble home in suburbs, do I use less gas than a person making 300k who only drives 10 miles to work? Is he going to be buying better or more expensive gas? Not likely. He's probably going to stop at the same gas station I do.
Hell, the CEO of my company pays the exact same premium for his insurance making 6 million dollars a year that I pay making 40k a year.
Of course, my premium is pretty reasonable at about 1500 dollars a year, but it's still 3.7% of my yearly income. For him, it is 0.025% of his income. Still, he pays a 15 dollar co-pay for his medication and I pay the same.
So of course, my post-consumption income is going to be a considerably smaller portion of my yearly salary than his will be leaving him room to invest AND live very comfortably which FURTHER increases his cash and reduces the percentage of his money that goes toward consumption than I will just squeaking by.
And we won't even go into the ways the middle and lower classes get dinged here and there (generally we are going to pay more in interest rates for our mortgage and have a longer period of accrued interest than someone making a lot of money).
But of course, those are arguments for a progressive tax scheme.
Ultimately, we ALREADY pay the same consumption tax rate as people making the big bucks. In the final analysis, in my state, where a person pay NO TAX for food, a man who eats filet mignon every single night and snacks on imported caviar is paying no more for consumption than I am already.
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