Skip to comments.Truth-O-Meter: Herman Cain said workers now pay 15.3% in payroll taxes (How accrate is this?)
Posted on 10/17/2011 1:52:25 PM PDT by SeekAndFind
Herman Cains 9-9-9 plan was the talk of the debate held Oct. 11, 2011, in Hanover, N.H., with Cains Republican opponents for the presidential nomination assailing the plan as unworkable.
At one point, moderator Charlie Rose warned other candidates that mentioning the plan meant more rebuttal time for Cain. "If you keep mentioning 9-9-9 and Herman Cain, I'm going to have to go back to him every other question," Rose said.
Basically, Cains plan would replace the existing laws on income taxes, payroll taxes and corporate taxes with flat tax rates of 9 percent -- a 9 percent income tax, a 9 percent national sales tax and a 9 percent corporate tax.
Cains opponents focused on the proposed new sales tax. "We're not going to give the federal government, Nancy Pelosi, a new pipeline, a 9 percent sales tax for consumers to get hammered by the federal government," said Rick Santorum, a former senator from Pennsylvania. "How many people believe that we'll keep the income tax at 9 percent? Anybody?"
Cains plan seems to have struck a chord with some voters because it appears easy to understand, particularly compared with the current tax code and its mish-mash of different rates, deductions, credits and loopholes.
But would voters be better off? The day after the debate, Cain was grilled by NBCs Chuck Todd, who wanted to know how the plan would affect working people. Todd quoted an analysis by economist Bruce Bartlett that said, "At a minimum, the Cain plan is a distributional monstrosity. The poor would pay more while the rich would have their taxes cut."
"First of all, the fact that I got attacked so much and my plan got attacked so much last night, that's a good thing," Cain said. "Because it gives me an opportunity to correct some of those misperceptions.
"For example, here's what a lot of people missed, including Bruce Bartlett. ...Start with the 9-9-9 and the fact that every worker pays 15.3 percent payroll tax. Now they're going to pay 9 percent, okay? That's a 6 percentage point difference. The 9-9-9 plan replaces payroll tax, capital gains tax, corporate income tax, personal income tax and the death tax. So, five taxes we replace with those three. We start with throwing out the current tax code."
Cain is suggesting that the new national sales tax would be a smaller percentage than todays payroll taxes. But the 15.3-percent number he mentioned didnt sound quite right to us, so we decided to check it out.
What we found is that Cain is counting both worker and employer contributions to payroll taxes to arrive at the 15.3 percent number.
First, heres a quick primer on how payroll taxes work: If you work for an employer, the employer deducts payroll taxes before you get your paycheck and then sends the money on to the federal government. The taxes pay for Social Security and Medicare; it's listed as FICA on your pay stub. Typically, workers pay 6.2 percent of their first $106,800 in earnings for Social Security taxes, and they pay 1.45 percent on all their earnings for Medicare hospital coverage. Thats a total of 7.65 percent in payroll taxes for workers making less than $106,800.
But the employer also has to match those taxes, bringing total contributions on behalf of an individual to 12.4 percent for Social Security and 2.9 percent for Medicare. That means total payroll taxes for each worker reach 15.3 percent, the number Cain mentioned.
So most workers see only about half the amount Cain mentioned deducted from their paychecks.
(And for every tax rule now in place, it seems like there are exceptions. The exception in this case is on the self-employed. They are required to pay the workers share of payroll taxes and the employer share. So that group would be paying the 15.3 percent Cain mentioned.)
Also in Cains defense, many economists believe that if the government were to end payroll taxes, it would mean higher pay for workers -- maybe not immediately, but at least over the long run, because its part of the cost of labor.
Still, theres no rule or law that would require employers to give workers a raise equal to the employer's share of payroll taxes previously paid to the government. The taxes paid now are not considered part of workers wages in any formal or legal sense.
We have to add one other note of explanation thats particular to the current economic downturn. In 2010, President Barack Obama and Congress knocked 2 percentage points off Social Security taxes for workers, as an economic stimulus measure. So this year, most workers are paying 4.2 percent while employers pay 6.2 percent. That means the current overall number isnt 15.3 percent, but 13.3 percent.
One final note on the 9-9-9 plan itself: In our review of the commentary on Cains tax plan, we saw that economic analysts have said the Cain campaign needs to release more detailed information on the plan so that it can be properly modeled, to find out how much revenue it would generate and how it would affect taxpayers of different income levels. Cain said in the interview with Todd that he intended to release more information on the plan soon.
Cain said, "Every worker pays 15.3 percent payroll tax." That's not accurate. Workers only pay half that, with the exception of the self-employed, as we mentioned above. The worker contribution is normally 7.65 percent, and thanks to the payroll tax rollback of 2010, the number this year is 5.65 percent. You can reach that number only by including the half of the tax that employers pay. Some economists say that if the employers half of payroll taxes were ended, workers would see a proportional rise in wages over the long run. But whatever the case, Cain was talking about the reality today. Workers don't pay a 15.3 percent payroll tax, so we rate Cain's statement Mostly False.
Dear God are these fools delusional! The employer 7.5% is wages directly out of the employees compensation!
just because the tax in hidden doesn’t mean it doesn’t exist.
This is like saying since you don’t actually get the money before having it deducted for social security and medicare that you were never actually taxed.
The self-employed pay this much. For example, let’s say yer a tradesman,fill out a Schedule C, that’s what you have to pony up. If yer an employee you pay half this, the employer pays the other half.
Because the employer magically makes the other half appear out of nowhere... good grief. It also didn’t account for the fact the 9% replaces both payroll and income tax..
But when Obama says that 80% of Americans support his jobs bill, it is accepted without doubt.
just to clarify and no I don’;t want to hear from those who oppose or support and come out with lies, just straight answers please.
Does this mean the child tax credit which went up under Bush will be gone?
Does this mean all deductions will be taken away?
Does this mean 9% will go on top of existing sales state tax therefore 8% will not be added to the new 9% therefore 17% is added on what you buy similar to a VAT?
I’m under the impression that if you make less than 20 grand then you pay 5.75% tax but this will go up to 9%?
Just yes or no please as the last time I saw these threads it turns into accusations, arguments etc and I can’;t be bothered right now with arguing .
semantics...Obama’s rollback is temporary.
nothing like being stretch arsmstrong to try and prove some one is wrong.
The employer is paying half of the social security on behalf of the employee. i.e. if the employer did not have to pay FICA they could pay the employee that amount instead, with no increase in their total compensation for the employee. It was an attempt to make the bit on the employee not look as large as it is.
I do not like that FICA and Medicare are referred to as payroll taxes.
At one point, moderator Charlie Rose warned other candidates that mentioning the plan meant more rebuttal time for Cain. “If you keep mentioning 9-9-9 and Herman Cain, I’m going to have to go back to him every other question,” Rose said.
At what point did any moderator say about romney or Perry?
I guess Cain is not their pick.
If nothing else, the 999 plan will get more people to understand what a clustermug the current tax code is, and how many hidden taxes there are, and that will be a good thing.
Another freeper spreading liberal lies about Cain?
Why are yu doing this?
Another freeper spreading liberal lies about Cain?
Why are yu doing this?
Can you help us out by computing what a person with an income of $40,000 will pay in taxes under 9-9-9 and under the current tax code?
Say this person has 2 children and a mortgage, under current tax laws, he probably pays NOTHING in taxes.
How much would he pay in taxes under 9-9-9?
On another note regarding the 9-9-9 plan. When taxes are pushed to the consumption side from the production side, they are not as easy to hide. Politicians won't be able to hide behind withholding increases every time they want to raise taxes. When you pay it out of your pocket every time you make a purchase, you will question what the government is doing with your money. Perhaps that is what is needed to keep so many people from being apathetic. I've always thought that if you made every citizen write a check every April 15th, you would see pitchforks running toward Washington. This does the same. Raising it wont be easy for politicians because the impact on the electorate will be immediate and universal.
When I was in high school (40 years ago) I posed the idea that the employer payroll taxes really came out of the employee paycheck since it was a cost of employment.
My very liberal poly sci teacher argued with me. He had been the president of the local AFT. I shot back at him: If a employment taxes were axed tomorrow, wouldn’t you be on strike the very next day in order to get “your” share of that money? (I realized that these taxes are different for teachers, but I put him in the general case.)
Conclusion of the article: “Cain said, “Every worker pays 15.3 percent payroll tax.” That’s not accurate. Workers only pay half that, with the exception of the self-employed, as we mentioned above. The worker contribution is normally 7.65 percent, and thanks to the payroll tax rollback of 2010, the number this year is 5.65 percent. You can reach that number only by including the half of the tax that employers pay. Some economists say that if the employers half of payroll taxes were ended, workers would see a proportional rise in wages over the long run. But whatever the case, Cain was talking about the reality today. Workers don’t pay a 15.3 percent payroll tax, so we rate Cain’s statement Mostly False.”
Complete crap - it’s all a matter of interpretation. Since the employer is paying you your whole paycheck, and is also paying the FICA and Medicare match, you could make a better case that the employer is paying the entire 15.3%
Your income tax (well, at least my freakin’ income tax) is deducted from my check, via the employer. Does that mean my employer is paying my income tax? I don’t think so.
This whole “employee pays half / employer pays half” Social Security scam is a ruse to minimize the impact of that ill-designed system from the sheeple. These idiots are willing dupes in perpetuating that fraud.
“Ends nearly all deductions and special interest favors”
would that depend on what state they reside, for instance NH does not have a state tax where as NY does.
It could depend considerably I suppose on where they live.