On another site on which I am a frequent participant, I was asked about the implications of applying the FICA tax to capital income. It seems an interesting exercise so I did the calculations which I will repeat here.
Starting with the IRS SOI data from 2009 (the most recent year currently available), we can gather up the additional income that was reported and would be subject to a potential FICA tax on investment income. This income totals to about $443 billion in 2009. Were we to subject that income to the full employee side tax rate of 7.7% (6.2% for SS and 1.5% for Medicare), we'd get total taxes raised of about $34 billion.
Comparing this to total FICA taxes in 2009 of $890 billion according to the CBO suggests that applying FICA taxes to investment income would increase FICA tax receipts by a bit less than 4%.
But what of its affect on governor Romney? Well, it would have raise his effective tax rate by 7.7 percentage points up to 21.8 percent. So we can conclude that it would have made people feel better about governor Romney's taxes (maybe) but made little difference otherwise.
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