Engine: Engine 1
Framing
payroll tax 28% replaces FICA and the $17,000 average employer health premium. No separate insurance bill. It is the citizen's flat contribution: paid first, on all compensation, before the progressive income tax begins. The payroll tax is a single, uncapped levy on all forms of compensation — wages, salaries, bonuses, stock-based compensation, contractor payments, and deferred compensation — and flows to the General Fund with no ring-fence: Distributed Healthcare and Social Security 2.0 are paid from the General Fund, full faith and credit, like every other federal commitment. The federal social stack is paid from one source, not three (FICA + employer premium + state Medicaid match), and the household sees one withholding line, not two on the paystub plus a separate premium share.
The canonical parameters
Baseline payroll tax rate: 28.00%
Employer portion: 17.50%
Employee portion: 10.50%
Cap: none (applies to all compensation)
Self-employed: the full 28%, both shares, so nothing is gained by classifying workers as contractors, with the employer-equivalent share paid by the business as a cost of doing business and never reported as the owner's income (no one pays income tax on the employer's 17.5%, even when the individual is the employer); the 1040 presumes all income is compensation that owes the levy unless the filer shows it is a return on capital at risk [BILL 2026-10-22]
Statutory corridor: 27.50% – 28.50%; the Debt Sunset Governor's automatic budget is +0.5pp from the launch rate, mirrored downward
Deductible: no. The employee portion is paid from after-income-tax compensation, as employee FICA is today [BILL 2026-08-14, reaffirmed 2026-10-22]
Internal allocation
There is none. The 28% payroll tax is uncapped and flows undifferentiated to the General Fund — no destination silos for Social Security, Distributed Healthcare, the Skills Wallet, Baby Bonds, or any other obligation. Distributed Healthcare, the Social Stack, Defense, Infrastructure, and every other federal commitment all draw from the General Fund alongside SS 2.0. During the 2031–2036 transition the existing SS Trust draws down to fund benefits; after Trust dissolution, SS 2.0 becomes a permanent General Fund commitment calibrated to the bend-point structure (90/28/22/10/5) and the $1,150/month Dignity Floor for 30-year contributors. The architecture deliberately retires the FICA-style earmark and the political fiction that accompanied it ("FICA funds Social Security" was never literally true once the Trust went into cash deficit). What replaces it is a statutory benefit floor plus a cause-agnostic Debt Sunset Governor — protections that survive the political cycle better than the earmark did.
What payroll tax replaces
FICA (Social Security + Medicare payroll tax) is retired. Under the current system, employees and employers together pay 15.3% on wages up to the cap, with additional Medicare of 2.9%. Payroll tax simplifies this to a single 28% rate with no cap. Net effect on a middle-earning household is modestly higher payroll tax, offset by Distributed Healthcare replacing private insurance premiums and by Universal Child Allowance and other benefits.
Why uncapped
The existing FICA cap creates a regressive structure. Removing the cap restores simple proportionality and produces approximately $3T more annually than capped FICA at identical rates.
Debt Sunset governor interaction
payroll tax is one of three instruments the Debt Sunset macrogovernor adjusts (the others are the top income tax rate and the VAT). The trigger, the steps and the band are stated once, in the Debt Sunset chapter and at /governance/debt-sunset.