Payroll Tax cut expires: 1k a year increase for 50k+

[Fergasun]

My wife quit her job and is in graduate school full-time. I pay the all the bills, including the mortgage, with my salary. I budget out everything to the last penny every single paycheck. While $20 a week wouldn't be the end of the world and we could make it work, it would suck. With her in school, our budget is crazy tight right now. One year down, only one more to go. Looking forward to being a two income home again.

I'm somewhat jealous.... I've got 2 kids and wife is stay at home mom. My mom went back to work when I was in 3rd grade (I'm youngest) and I figure my wife could work when our youngest is 1st or 2nd grade.

I can understand that people make enough where there isn't an impact, and good for them.... but there are tons of families that are budgeting down to the last dollar and it's going to hurt.

[Redskins Diehard]

I took the 2% and "privatized" that much of my social security. If it expires then it goes back to the old model.

I've asked some of my friends/family that are the loud proponents of privatizing social security exactly what they did with the 2% they regained access to. Remarkably very few actually increased their savings. I wonder if that would carry over to giving us the choice as to what to do with all of our social security?

[Duckus]

I'm somewhat jealous.... I've got 2 kids and wife is stay at home mom. My mom went back to work when I was in 3rd grade (I'm youngest) and I figure my wife could work when our youngest is 1st or 2nd grade.

I can understand that people make enough where there isn't an impact, and good for them.... but there are tons of families that are budgeting down to the last dollar and it's going to hurt.

Absolutely. Maybe I didn't write my point clear - we are one of those families. It is going to suck if the payroll tax cut expires. Like really, really, really suck. Right now I budget to the last penny on every paycheck. We don't have much extra spending money, if any at all per month. I said it won't be the end of the world, because we will make it work, like we always do. But it will make this last year of her in school just a little bit harder than otherwise.

[Elessar78]

I certainly didn't mean to imply that people who have legitimately tight budgets just suck it up. It's the diffculty of talking about policy. One can't deal with the exceptions because otherwise nothing would get done.

Polling showed during the election season that a broad swath of people are unhappy about the deficit, as they should be, and this is part of the price of that outrage. It'll cost us personally.

[chipwhich]

His math is 100% correct. Whether the person contributes to a 401K or not.

(The money you contribute to a 401K, or an IRA, doesn't count as income for your INCOME tax. But that money does count for FICA taxes.)

The $1000 comes out of your gross pay.

The $1000 is not NET pay.

So his math is right about gross pay, but as far as economics and what the employee has to spend and what is in their budget, it is NET pay. NET pay wont be $1000 less which was my point.

And the amount less will depend on couple of things including 401K, but I don't have the energy to explain to you ad nauseum how gross pay becomes net pay and all the steps in between. Stuff is taken out PRE tax and stuff is taken out POST tax, and they both affect NET pay.

[HOF44]

I can see two possible major explanations.

1) It's not a tax hike on the rich. (The payroll tax only affects earned income, and only the first $110K. So it's a tax hike on everybody BUT the top 2%.)

2) It doesn't have Bush's name on it, therefore the Republican Party isn't getting credit for it.

I'll go with #1!!

[Thiebear]

I can see two possible major explanations.

1) It's not a tax hike on the rich. (The payroll tax only affects earned income, and only the first $110K. So it's a tax hike on everybody BUT the top 2%.)

2) It doesn't have Bush's name on it, therefore the Republican Party isn't getting credit for it.

Or like everyone in here seems to see: It was put in place to help out the poor while the economy faltered.

The economy is doing much better with unemployment below 8% so its obviously no longer needed?

Need to come back in February and add up all the 60$ increases and see if they start piling up into a car payment size

[Larry]

Or like everyone in here seems to see: It was put in place to help out the poor while the economy faltered.

The economy is doing much better with unemployment below 8% so its obviously no longer needed?

Need to come back in February and add up all the 60$ increases and see if they start piling up into a car payment size

Ah.

So your theory as to why the GOP is fighting tooth and nail to prevent a 2% tax increase on "the rich", but not a 2% tax increase on "everybody else" is because the 2% payroll tax cut was supposed to be temporary?

I could have sworn that the tax cuts on the rich were supposed to be temporary, too. In fact, I could have sworn that every single time they've been extended, they've sworn that it was only temporary.

Or perhaps you're saying that the reason that were given, when the payroll tax was cut, no longer apply?

Should I point out that the reason that was given for the Bush tax cuts, was to save us from a nightmare prediction which predicted that, if we didn;t cut taxes, the entire federal debt would be paid off in 2015?

I don't think that that reason applies any more, either.

[Tulane Skins Fan]

Ah.

So your theory as to why the GOP is fighting tooth and nail to prevent a 2% tax increase on "the rich", but not a 2% tax increase on "everybody else" is because the 2% payroll tax cut was supposed to be temporary?

I could have sworn that the tax cuts on the rich were supposed to be temporary, too. In fact, I could have sworn that every single time they've been extended, they've sworn that it was only temporary.

Or perhaps you're saying that the reason that were given, when the payroll tax was cut, no longer apply?

Should I point out that the reason that was given for the Bush tax cuts, was to save us from a nightmare prediction which predicted that, if we didn;t cut taxes, the entire federal debt would be paid off in 2015?

I don't think that that reason applies any more, either.

People who have jobs are living off the government teet and should see their tax breaks expire. People who own businesses that their daddies gave them create jobs.

(Tongue in cheek everyone)

Also: http://www.washingtonpost.com/blogs/fact-checker/post/history-lesson-why-the-bush-tax-cuts-were-enacted/2012/12/19/55a93ac6-4a1d-11e2-ad54-580638ede391_blog.html

Larry is right.

[jnhay]

$38.46 per biweekly paycheck. Is it really that big a deal? .02% increase in taxes (if you make $50K)??

The typical American househould pisses away more than that on stupid stuff a year. Forego your daily latte and you've paid for this tax increase.

I don't see the problem with saying that people can deal with saving more, but it's kinda funny because this will probably effect people's spending habits way more than the increase in tax to the 250+ earners.

[Elessar78]

The $1000 comes out of your gross pay.

The $1000 is not NET pay.

So his math is right about gross pay, but as far as economics and what the employee has to spend and what is in their budget, it is NET pay. NET pay wont be $1000 less which was my point.

And the amount less will depend on couple of things including 401K, but I don't have the energy to explain to you ad nauseum how gross pay becomes net pay and all the steps in between. Stuff is taken out PRE tax and stuff is taken out POST tax, and they both affect NET pay.

On a 50k income 15% tax bracket means their bill is $7500 in 2012 and $8500 in $2013. So take home is $1635 and $1596 biweekly with a difference of $39/check. It's not actual take home because I didn't take out other stuff like health care and state and local. Someone check my math please.

[Larry]

The expiration of the payroll tax cut will result in a cost of exactly 2% of an employee's gross pay, with exactly two exceptions:

1) If the employee makes more than $110K/year, then it will only cost 2% of 110K/year.

2) If the employee has chosen to "spend" a part of his paycheck through payroll deductions, then, when the employee's pay goes down, the amount which he voluntarily spends will go down, too, thus resulting in his actual paycheck not going down as much.

Hypothetical example: If an employee has chosen to ask his employer to take part of his money, and put it in an IRA or a 401K.

Say the employee has chosen to have 5% of his paycheck deducted for him, this way.

When the payroll tax goes up, his pay will go down. By exactly 2% of his gross pay. (Say he was making $2000 per paycheck. His FICA will go up by 2% ($40). His pay will go down by the same amount. But, because his pay went down, the amount that gets donated to his IRA goes down, too. By (5% of $40 equals) $2.

His paycheck will only get smaller by $38. But, the amount he's putting into his IRA will be $2 smaller than it was.

He'll be making $40 less. But he'll be spending $2 less. Paycheck gets $38 smaller.

But the tax hike still cost him $40. Whether he puts $2 less in his IRA, or spends $2 less on donuts, that's "$2 less spending". Not "the tax hike only cost him $38".

Most of the time, figuring out how much a tax change will cost you is rather complicated. But this case is one of the exceptions. It'll cost you 2% of the "gross pay" on your paycheck. (Unless you make more than $110K)

[Special K]

The only issue I have with it is that we taxpayers will do our part and pay more but I have 0 confidence in the government actually cutting any spending.

That's exactly where I'm at. This doesn't really hurt my budget and I would actually be more than happy to pay quite a bit more. I can afford this and maintain my daily Starbucks coffee routine. I just have ZERO confidence in our government at this point, particularly with continued bullcrap inability to reach a reasonable compromise in regards to this fiscal cliff. These idiots are complete bozos and I'm 100% confident they are going to continue to piss our money away and put us further into debt.

FTR, I'll be very happy to be proven wrong in my doubts throughout the next few years. If they show an ability to cut down debt and reign in some spending, I won't be upset about about incremental tax raises.

[chipwhich]

On a 50k income 15% tax bracket means their bill is $7500 in 2012 and $8500 in $2013. So take home is $1635 and $1596 biweekly with a difference of $39/check. It's not actual take home because I didn't take out other stuff like health care and state and local. Someone check my math please.

You aren't paying 15% on an additional $1000 income. They are taking $1000 additional from your paycheck PRE TAX. The difference will be less that $39 a check.

/Chases tail.

---------- Post added December-20th-2012 at 03:26 PM ----------

When the payroll tax goes up, his pay will go down. By exactly 2% of his gross pay. (Say he was making $2000 per paycheck. His FICA will go up by 2% ($40). His pay will go down by the same amount. But, because his pay went down, the amount that gets donated to his IRA goes down, too. By (5% of $40 equals) $2.

Incorrect.

[Larry]

Well, if your definition of "cutting spending" is "less nominal dollars than we spent, last year", then I suspect that the government has never "cut spending". (Maybe after WW2.)

If you look at spending, after adjusting for inflation and population growth, then government spending over history looks flatter. But it still trends upwards.

If you look at it as a percentage of GDP? It really hasn't changed that much since WW2.

Now, which scale should it be measured on?

Personal opinion, but I think that "% GDP" is the most rational, simply because that's the only scale that doesn;t make it look like spending is exploding, no matter which year you pick as the last year of your chart.

[Special K]

Apologies

[Larry]

Incorrect.

Absolutely, 100%, correct.

But feel free to keep throwing around vaguely worded generalities about how your vast knowledge makes it too far beneath you to actually back up your claims. And lots of capital letters about how taxes are taken out PRE TAX.

----------

Or here. Let's make it simpler.

John Doe receives a paycheck, every two weeks. His gross pay is $2000, every 2 weeks.

1) How much FICA is deducted from his paycheck, right now?

2) How much will be deducted, if the rate goes back up?

[chipwhich]

John Doe receives a paycheck, every two weeks. His gross pay is $2000, every 2 weeks.

He contributes 10% to his 401K.

His gross pay is the same regardless if he pays 2% or 4% social security.

His taxable pay changes based on if he pays 2% or 4% social security.

His 401K contribution doesn't "go down" and his taxable income doesn't remain the same.

[Larry]

He contributes 10% to his 401K.

And what that has to do with my question is . . . ?

His gross pay is the same regardless if he pays 2% or 4% social security.

Actually, he presently pays 4.2% to SS, and if the rate goes up, will pay 6.2%.

However, the first half of your statement is correct. His Gross Pay is his Gross Pay.

His taxable pay changes based on if he pays 2% or 4% social security.

His taxable pay is exactly the same. It's called his gross pay.

His income tax is based on more complicated calculations. Based on things like his filing status (single/joint/separate), number of deductions, and possibly other factors.

None of which change, in any way, if his SS tax changes.

His income tax will remain exactly the same.

His 401K contribution doesn't "go down" and his taxable income doesn't remain the same.

I didn't mention a 401K. You pulled it in.

But I'll play. He contributes 10% of his gross pay to the 401K? Or 10% of his after-tax pay?

[Tulane Skins Fan]

And you wonder why the top 2% of money earners are annoyed...the increase of flippant, patronizing comments like this that continue pitting one side against the other and essentially villainize them. Ridiculous.

Do you know what tongue in cheek means.

In case you don't, it means that this post is the flippant one and not the last one.

[Special K]

Apologies

[HaveFaith]

OK a simple question here:

Lets assume that all of the tax cuts expire and that it does not have any negative impact on employment.

How much will the annual deficit still be?

Our elected leaders of both parties refuse to talk about issues that they need too (because if you do you lose your election)

If you take entitlement spending out of the discussion then it doesn't matter what we do with tax policy, we will continue to have unsustainable deficits,

I don't care if you blame Reagan, Bush I, Clinton, Bush II, or Obama, fault at this point matters far less than fixing it going forward.

I for one don't want my taxes to go up, but if I saw some realistic plan to get us towards more sanity, then I would be willing to do my part to get there. As it stands any additional money I send to the US Treasury does not seem like it will reduce the annual deficit or the national debt at all

I am sorry if some think that reducing the annual deficit from 1.2 Trillion to 1.0 Trillion is really "Progress" At some point we the Government need to spend less than we take in and it seems it would be easier while interest rates are near historic lows. If we wait for interest rates to go up just a couple percentage points then just watch how fast the debt will balloon in the future.

[Tulane Skins Fan]

I know exactly what it means.

You ever heard of the quote "many a true word is spoken in jest"? It's actually very relevant. People who make jabbing "jokes" like that are rarely joking as there typically is a level of truth behind it. Doesn't take a psychologist to understand that. Whether it's a petty, smart ass quip or a direct statement, it typically pisses the target of the "joke" or statement off the same amount.

That's my underlying point: whether it's a joke or serious statement, the tax discussion is highly volatile and has inflamed many passions. Continued jokes about "daddy's money" and other flippant comments like "yeah, my heart bleeds for the rich" (fyi, I'm not attributing that quote to you) tend to piss people off and make them less inclined to engage in any type of reasonable debate because they start perceiving a type of class warfare against them (and to be clear, this goes for both ends of the spectrum: people stereotyping low income families or those on welfare as all "lazy asses" do nothing to help the debate either and need to shut their mouths). Anyway, just a pet peeve of mine in these threads...and obviously I shouldn't even come ino these threads as they are typically chalk full of this crap So I'll move on to other things so I don't continue to get annoyed by "tongue and cheek" "jokes."

No it was just a joke. And you seemed like someone hopped up on angry looking to pick a fight.

By the way, I make more than 250k a year and own my own business. Jackass.

I'm willing to bet you dont do either.

[Redskins Diehard]

No it was just a joke. And you seemed like someone hopped up on angry looking to pick a fight.

By the way, I make more than 250k a year and own my own business. Jackass.

I'm willing to bet you dont do either.

Now, now...no need to call people names. I don't think we do that around here. Whether you make a ton of money and own your own business or not.

[Tulane Skins Fan]

Now, now...no need to call people names. I don't think we do that around here. Whether you make a ton of money and own your own business or not.

I succumbed to the anger of the web.