I\u2019m going to get in trouble for this one, but here goes:<\/p>\n
Why do we fund Medicare with a payroll tax?<\/p>\n
With Social Security, the logic is readily apparent: \u00a0the program is designed to replace earned income, since that\u2019s the income you lose when you retire. \u00a0The formula is based off one\u2019s earned income, up to the ceiling, and with decreasing accrual rates at the various bendpoint, and one is meant to believe that you\u2019re paying your own way with your contributions.<\/p>\n
But with Medicare?<\/p>\n
Not only do retirees in aggregate receive far more in benefits than they paid in taxes during their working lifetime, but everyone gets the same benefit (when measured as insurance premium costs, not actual payouts), rich and poor alike. \u00a0There is simply no way in which one \u201cearns\u201d one\u2019s Medicare entitlement by \u201cpaying premiums\u201d during one\u2019s working years; one simply paid taxes.<\/p>\n
To a certain extent, the government recognizes this fact: \u00a0the ceiling for the Medicare component of the FICA taxes was removed in 1994. \u00a0And, with the ACA, of course, devilishly complicated surtaxes were added for both earned and investment income of high earners.<\/p>\n
But the very fact that we have a special payroll tax for Medicare produced these calculations. \u00a0Why not simply fund Medicare via a portion of the general income tax?<\/p>\n<\/body><\/html>\n","protected":false},"excerpt":{"rendered":"
I\u2019m going to get in trouble for this one, but here goes: Why do we fund Medicare with a payroll tax? With Social Security, the logic is readily apparent: \u00a0the program is designed to replace earned income, since that\u2019s the income you lose when you retire. \u00a0The formula is based off one\u2019s earned income, up […]<\/p>\n","protected":false},"author":2209,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[450],"tags":[],"class_list":["post-1744","post","type-post","status-publish","format-standard","hentry","category-actuarial"],"yoast_head":"\n