"if you end up at $90,000 from your company, your whole income should be liable for FICA just like a BigCo worker's"
Why? By that reasoning, shouldn't profits that BigCo shareholders make (which become personal income when they realize them) subject to FICA? I'm both an owner and an employee -- why shouldn't some of my income be FICA-taxable as the output of "labor", and some be non-FICA-taxable as business profit?
>Shrug<. The profits that private traders make are technically investment income too, but they have to pay self-employment on them.
I think the reality is that most of the income we're talking about here really is just the product of labor. I'd be interested in hearing the scenario in which a small S-Corp is generating profits that are meaningfully different from their basic payroll.
S-Corp will pay payroll taxes on "fair salary" even if none of the profits are distributed and all of it is reinvested back into the business. That's unfair too, isn't it? And it's very typical for a bootstrapped company - I keep burning through my savings and reinvest all company profits back into the business. Why should I pay payroll taxes on that? That money was never paid out to anyone and shouldn't be taxed as anything more than income tax.
Why? By that reasoning, shouldn't profits that BigCo shareholders make (which become personal income when they realize them) subject to FICA? I'm both an owner and an employee -- why shouldn't some of my income be FICA-taxable as the output of "labor", and some be non-FICA-taxable as business profit?