Employee Making Under $184,500 Tax Rate
Rep Murray: Is it right that those making under $184,500, their effective payroll tax rate is roughly 12.4%?
Dr. Molly Dahl: That’s right. The statutory tax rate is 6.2%, but consensus view is that the employee pays, basically the employer cost is passed on to the employee, and so the employee basically faces a tax rate of 12.4%.
Someone Making $1 Million a Year Tax Rate
Rep Murray: For people earning $104,500. What is the effective payroll tax for someone making $1 million a year?
Dr. Molly Dahl: So those people would pay the 12.4% tax rate on that first $185,000 roughly and then would not pay additional tax on labor income above that amount. So that math would work out to about 2.2%.
Rep Murray: 12.4% for people under $184,500. A millionaire would be about 2.2.
Someone Making a $1 Billion a Year Tax Rate
Rep Murray: What if you’re a billionaire like Trump or Musk, your Social Security tax would be effectively, on my understanding?
Dr. Molly Dahl: Very, very much smaller.
Rep Murray: 0.0002.
Dr. Molly Dahl: Yes.
Rep Murray: That just doesn’t make sense to me. When the richest people in the country have the smallest effective tax rate, that does not seem to me like a very fair system, especially when we are now six years away from retired people facing this 24% cut in their Social Security.
