More in social security cap

If you are a business owner you pay 12.8% of your first $118,000 income into social security. This is $15,100. If the earnings cap on social security is removed then the business owner who earns $500,000 will pay $64,000 per year into social security. This happens because self-employed people pay both the employees amount which is 6.4% but then they also pay the employers matching 6.4%. Looking at an example of what we would all call a rich person, that is, a businessman who earns $500,000 after deductions we see the $64,000 in social security tax plus $14,500 in Medicaid tax, plus $4,500 in excess Medicare tax, plus $155,000 in federal income tax, plus $30,000 in state income tax, plus $10,000 in alternative minimum tax for a total of $278,000. This means the take home pay from a person who has a net income of $500,000 is $222,000. While most would be thrilled with this amount of income, most have not taken the risk of owning their own business and when you know that four out of five businesses don’t make it past five years, most would not try it. In addition these business people are where the new jobs come from and they should be encouraged.