FICA taxes and medicare taxes, adding up to 15% or so, only apply to your first 100k or so of income. So if you're making 500k, you're probably paying less in taxes as a % of your income than your secretary.
Just wanted to point that out.
Not even close. (And your numbers are wrong. FICA alone is about 15% and medicare is about 3%.)
You pay medicare on all earned income. (And, with Obamacare, you're going to be paying it on unearned income as well, if you're making $200k as a single or $250k total for married couples. Yup, married engineers are going to be hit by this.)
Back to the secretary. You paying the same rate on the same income. You stop paying FICA at $105k, but by then you're in a higher bracket for other taxes.
At $500k, your marginal rate and average rate are pretty close. Below $100k, they aren't.
No, you don't pay FICA above $105k, but you also don't get benefits from higher contributions.
Someone else pointed out how the benefits change as a function of contributions so I'll point out why SS advocates set up the system with a cap on both contributions and benefits.
If the system has uncapped contributions and benefits, it will end up paying Ross Perot $500k/year. I suspect that you're not willing to do that.
If the system has uncapped contributions and capped benefits, rich people will pay a lot more attention and work to reduce SS because that would be a huge hunk of money.
The other alternative, capped contributions and uncapped benefits is a non-starter.
That leaves us with the current system, capped contributions and benefits. SS advocates picked that because they thought that a SS system that rich people ignored was best.
Were they wrong? Do you really want rich people paying attention to SS? They will if it's taking 15% of their income.
http://www.cbpp.org/cms/?fa=view&id=531: For the first dollar of average lifetime income, you get a Social Security benefit of $0.90. At higher incomes, a $1 increase in average lifetime income adds only $0.15 to annual benefits.
Why do questions of how much ratio people are paying, or social engineer (i.e., giving incentives for certain behavior) always come up in tax debates?
I should have to pay for the services I get. If I have 2x as much property, then maybe I should pay twice as much in tax, since the government is protecting twice as much. But when people talk about the fact that the tax you pay amounts to X% of your income, well, so what? And even worse, when they talk about the need to tax, say, cigarettes in order to discourage smoking, well, the point of the government is not to tax first, and find places to spend it later...
http://www.cbpp.org/cms/?fa=view&id=531: For the first dollar of average lifetime income, you get a Social Security benefit of $0.90. At higher incomes, a $1 increase in average lifetime income adds only $0.15 to annual benefits.