Casey B. Mulligan is an economics professor at the University of
Chicago. The federal government’s two main revenue sources are
the individual income tax and the payroll tax. The more rapid
growth of the payroll tax (which includes Social Security and
Medicare taxes) relative to the individual income tax may be one
reason politicians increasingly call for “taxing the rich.”
Officially known as a “contribution,” the Social Security tax
brings in almost as much revenue as the individual income tax,
and is catching up. By June 2009, annual revenues for the
payroll tax collections had reached almost 90 percent of
individual income tax collections. The Social Security part of
the payroll tax is about 12 percent of the first $106,800 of
employee earnings in a year. The Medicare part is about 3
percent of all payroll earnings (regardless of whether and how
much employees make over $106,800). As a result, people earning
over $106,800 pay a lesser percentage of their earnings in
payroll taxes than do people earning le