Maggie's Farm

With a few modifications, I have long believed that the only fair income tax is a flat rate tax in which everyone pays the same rate. (1) A reasonable FICA tax, like the income tax, should only be levied on salary that's above an inflation-adjusted base level. Above that threshold there should be no ceiling on how much of a person's salary is subject to FICA. There should no exemptions or deductions allowed from taxable income. A reasonable estimate for what it costs people to live should be folded into the threshold or base amount of income that is exempted from tax. (2) Employers should not have to pay FICA on their employees' wages. Regressive payroll taxes serve to depress employee wages. (3) Most importantly, a retired person's SS benefits should be fully exempt from income tax until he has recovered all of the contributions he's made in the form of FICA taxes over the years he was working. Workers pay FICA tax with pre-income tax dollars; those same dollars should not be double taxed when a retiree begins to collect his SS benefits. After a retiree has recovered his "principal" any additional benefits he receives should be taxed not as ordinary income, but at the reduced rate of a long-term capital gain, i.e., on the same basis as a long-term investment.