The new year should bring a welcome change for about 155 million working Americans: extra money in their paychecks. As part of the much-maligned package of tax cuts and extended unemployment benefits agreed to by President Barack Obama and Republican leaders, Obama negotiated in a reduction of payroll taxes for one year.
The new year should bring a welcome change for about 155 million working Americans: extra money in their paychecks.
As part of the much-maligned package of tax cuts and extended unemployment benefits agreed to by President Barack Obama and Republican leaders, Obama negotiated in a reduction of payroll taxes for one year.
The administration says the temporary tax holiday would be an efficient way to help the economy regain traction, and the proposal has support from lawmakers on both sides of the aisle, as well as from economists, business groups and the United Auto Workers.
White House officials also say government funds will be used to replenish Social Security, so the program won’t be adversely affected.
A payroll tax deduction is a small victory for those in the middle- and lower-income brackets, compared to the massive win the wealthy will get by extending the Bush-era tax cuts for everyone for another two years. But it would mean the big bite taken out of workers’ paychecks for Social Security will be about one-third less than usual, dropping from 6.2 percent to 4.2 percent.
Of course, even here the rich will reap more benefits. Workers earning wages of $25,000 a year would receive an extra $500 in 2011, compared to $2,000 for those making $100,000. As my brother would no doubt tell me, that’s just simple math. Those earning more will obviously see more savings from a tax cut, and, on the flip side, have more deducted from an increase.
What did surprise me, however, was to discover that Social Security taxes are only taken out of a worker’s first $106,800. For years we have been barraged by dire warnings about how quickly Social Security is running out of money, and how the system needs reforms soon to stay solvent beyond 2037.
As someone who won’t reach the stated Social Security retirement age for full benefits until years after that, I have a vested interest in seeing the program fixed. It seems to me an obvious first step would be to remove that cap and tax workers’ entire earnings, regardless of how much they make. After all, wasn’t the GOP’s reasoning for obstinately holding up any progress in Congress until the tax cuts were extended for all — low-income and wealthy alike — essentially based on the idea of fairness?
Sure, conservatives claim that eliminating the tax break for an individual making more than $200,000 would harm the economy, especially if a small-business owner reported his/her income as an individual. But as reported by The New York Times, “Analyses from the Joint Committee on Taxation and the Tax Policy Center, a nonpartisan research organization, show that less than 3 percent of filers with small-business income pay at the top two income tax rates, and many of those are doctors and lawyers in partnerships.”
Unable to refute that, Republican leadership instead took a stance most parents of small children are familiar with: a stomped foot, a whined “it’s not fair” and a refusal to do anything until one gets what one wants.
How could those same lawmakers then, in good conscience, turn around and not vote for a bill to bring parity to the way Social Security taxes are calculated? Maybe they’d put their money where their mouths are, and if not, at least they’d be unmasked as hypocrites and voters might not be so quick to elect them back into office.
Amy Gehrt may be reached at firstname.lastname@example.org.