Identify and describe the reasons why Social Security is considered to be a regressive tax
What will be an ideal response?
Ideal Answer: The ideal answer should include:
1. Describe ways in which the Social Security system is financed through taxes on wages and salaries.
2. Illustrate how the rate of the tax is capped after a certain amount.
3. Describe that the method of financing Social Security is not equitable because it disproportionately disadvantages lower-income wage earners.
4. Close with a discussion of how the process takes a larger percentage from people with the lowest incomes because it applies to wages and salaries, thus exempting income that is typical of wealthy individuals. For instance, with the 2012 ceiling cap of $110,100 a worker making $110,100 and an executive making 5 million for salary paid exactly the same Social Security tax.
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