Paul Thomas, CPA
Bob B. said:Geez, you're both right depending on how you look at it, no?
No. There is no "zero tax rate" applied. Those wages or earnings are
exempt from the tax.
The rate is single since no person ever pays anything
other than the stated rate on any income that legally
falls under the tax. The rate is not single in that it is not
a continuous function of income from zero to infinity.
Does it have to be to be considerd "flat"?
I have more sympathy for Randall's position, because you're arguing that
certain types of income are exempt.
They are. Exempting income doesn't mean there is a tax rate or "0%" on the
When someone says "types of income", they usually mean
something like the difference between wages earned and
capital gains, not between the 97,500th dollar and the 97,501st dollar
earned in exactly the same fashion.
"Types of income" is not an issue here. The fact that there is some of the
same type of income that is exempt is irrelevent to the matter of the tax
rate being flat on that income that is taxed.
So the distinction does seem disingenuous and very
much like a tax weighted to fall disproportionally on
those earning less than the cap.
At very small incomes from wages and/or self-employment there is a negative
tax as it relates to the Earned Income Tax Credit, which is effectively a
refund of FICA paid or withheld.