This proposal would provide an above the line deduction for the employee share of the Social Security portion of the FICA tax and the SECA tax. In calculating their income taxes, workers would be able to subtract from their gross income the 6.2% of Social Security taxes taken from their paychecks by the federal government.
Workers no longer would be taxed on a tax.
* Hard-working Americans no longer would be forced to pay a tax on a tax -- income tax on their Social Security tax.
Workers would be able to keep more of what they earn.
* The Social Security tax paid by employers and self-employed individuals would be deducted from gross income, so that ALL workers benefit, even those who do not itemize deductions.
* The middle class finally would get the tax break it deserves. 72.6% of all families pay more in total Social Security payroll taxes than they pay in income taxes.
* The current tax treatment of the employee's share of the Social Security tax is
particularly onerous for workers who earn too much to be eligible for the earned income tax credit (around $25,OO0,), but not enough to exceed the minimum taxable base where Social Security tax stops being taken out of paychecks ($65,400).
* For middle-income taxpayers, who get hit the hardest by both the Social Security tax and the income tax, making the Social Security tax deductible would reduce their effective tax rate by approximately 1 percentage point.
* The average two-income American family would save over $1,200 in taxes.
Workers would receive the same tax break that businesses already enjoy.
* Employers would retain the ability to duduct payroll mes as a business expense while employees and self-employed individuals would gain the opportunity to deduct fully their share of the Social Security payroll tax.
Estimates suggest that the payroll tax deduction would produce over 900,000 new jobs by 2002.