I'd like a tax code that seems fair for everyone. That is why a flat tax with no deductions appeals to me. I do agree with a progressive tax system. Those who earn more should pay more, as a percentage, than those who earn less.
If we had a flat tax with a large standard deduction, everyone would be paying the same as a percentage of income. Everyone would also claim the same standard deduction. As a result, the more money a person makes, the more the person would pay in tax as a percentage of income.
Some don’t like that. They want the percentage to be higher as you make more money. There are currently 7 tax brackets. The bottom bracket is 10% on incomes under $11,925. The top bracket is 37% on incomes over $626,351.
However, the top earners get to take advantage of many deductions. Those who favor them claim deductions encourage people to do things for the public good. Those opposed claim deductions are simply ways to reward donors.
According to the IRS, we do have two flat taxes right now with no deductions. Social security is 6.2% paid by both the employee and the employer. Medicare is 1.45% paid by both employee and employer.
There is a wage base limit of $184,500 for social security in 2026. Social security taxes stop at that limit. On the other hand, people who earn more than $200,000 pay .9% on all income over that amount. There is no employer match.
I believe we should remove the limit on social security wages. Removing the limit would bring several advantages. It would bring in 12.4% increased revenue on all income over $184,500. It would encourage people to think of it as a tax that is benefiting all, rather than a forced retirement account.
Some will argue that they earn millions and will never get their money back out of social security. That should be true of all taxes. We shouldn’t be paying taxes hoping to get paid. We pay taxes for the public good.
Some will say they don’t need social security. They have enough money and shouldn’t have to pay into it. That is really an argument for means testing. People who don’t need social security shouldn’t be receiving it.
However, the idea that we won’t need it is challenged by two examples. One is the father of a friend of mine. The father was earning millions and lost it all in bad investments. I personally know someone else who had the same fate. Both men wound up needing social security.
Everyone is used to paying social security and Medicare tax. Why should they stop paying social security when they make more than $184,500? On the other hand, why should people making more than $200,000 pay an additional .9% in Medicare? Why doesn’t the employer have to contribute? I think we should leave Medicare at 1.45% for both employees and employers with no limit.
Well, that’s my idea for the beginning of a shift in tax policy. I believe it makes tax policy fairer. It makes it obvious that people are paying a tax and not paying into some retirement account. It would raise revenue for social security.
If we add means testing for social security, we might just make it solvent.
Please like and share this thought. Who knows? Maybe something will change.