Why do we fall for so many lies about taxes?

I just heard a report on CNN about a Republican stimulus proposal for a 6 month Social Security tax holiday.  The reporter said, "…everyone pays 6.2% in Social Security taxes…"

Can we please quit misrepresenting the size of Social Security taxes?  Your employer is paying another 6.2% as the "employer share" of the tax.  Realize that you actually earned this money, i.e. you were worth it, or your employer would fire you.  Your base pay is suppressed by 6.2% if you are a W-2 employee, allowing your employer to cover the 6.2% the employer pays.  This is obvious to anyone who is an "independent contractor" or business owner.  THEY pay the full 12.4% directly.  But even this does not clearly represent the cost to the employee because we’re not mentioning the Medicare taxes that add another 2.9% effective.

The majority of the 170,000,000 workers paying these taxes actually have a larger share of their earnings taken in FICA taxes (Social Security plus Medicare) than in all other personal taxes combined.  I’m not saying it is or isn’t worth it.  I’m simply pointing out that we have this crazy way of obscuring from the taxpayers the size of the tax bite on their take home pay.  The bite totals 15.3%.  The media continues to talk about “Income Tax” as if it was the center of the debate over taxation!  The vast majority of individuals pay more in FICA taxes than in personal income tax, and further, these two COMBINED are only half of the total tax revenues collected in this country.  See USGovernmentRevenue.com for information on the total tax load on the economy.  Total government revenues (all levels of government, all forms of taxation) actually equals fully one third of the nation’s Gross Domestic Product (GDP)!

I think politicians want us to be ignorant about taxes.  It is much easier to keep government large if voters are unaware of the total cost of government.  It is much easier to keep tax revenues high as long as the voters think the majority of taxes are paid for by the rich and powerful, as is only true for direct personal income taxes.  Reality is that most of the dollars that turn up as tax revenue starts out embedded in the price of goods sold.  …yes, YOU, the consumer, even if you are unemployed and have no taxable income, end up plunking down the money that ends up paying those property taxes, FICA taxes, income taxes, etc. of those who provided whatever you purchased.

But I digress.  The “crisis of the week” is President Obama’s “stimulus” bill, currently roiling Congress.

If the goal is to stimulate the economy through spending and investment, QUICKLY, the best way would be to allow the workers to keep the 15.3% collected in FICA taxes.  Rather than take it from them and months or years later give it back as stimulus spent on politically selected projects/recipients, simply allow the MILLIONS of workers to keep the money and immediately decide how best to invest their share, the share they earned!

I know nothing about the Republican proposal.  I simply point out that that a TRILLION dollars is almost precisely what is collected each year in FICA taxes.  If we are going to borrow and spend a TRILLION, then spend the borrowed money making up for a year long FICA tax holiday.  Is there anything more important to spend the money on than Social Security and Medicare benefits?

Meanwhile, vast numbers of employees will be able to keep their jobs because they become 7.5% cheaper to their employers (employer share) and because many more customers will have 7.5% more money to spend.  (I think the employer share should be kept by the employer as a stimulus to the businesses, thus the "lower cost of labor" for the period of time the tax holiday runs.)

Isn’t this the BEST way to spend a TRILLION quickly?  I think this may well SHOCK the economy back to life.  It is far easier to keep a person in a job than to lose the large sums involved in closing down going concerns and starting up new projects for the fewer "winners" chosen by government bureaucrats and politicians.  …especially when it takes (on average) over a year to get the money to the "winners" under the current "stimulus" proposals.

Regardless, do not allow politicians of EITHER party to empower themselves and pay-off their supporters by obscuring the size and origins of revenue or by playing the “class warfare” card.

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