Reference no: EM131023556

Currently, the Social Security and Medicare programs are funded by payroll taxes rather than by the federal personal income tax. In 2013, the payroll tax for Social Security was 12.4 percent on wage, salary, and self-employment income up to $113,700. (Half of the tax is collected from employers and half from employees.) Above that income level, the tax dropped to zero. The Medicare tax was 2.9 percent on all wage, salary, and self-employment income. Some economists and policymakers have proposed eliminating the payroll tax and shifting to funding Social Security and Medicare out of the federal personal income tax. Would this proposal make the federal income tax system as a whole more progressive or less progressive? Briefly explain.