A "cut in payroll taxes"

[Stinky The Clown]

That is a fucking lie.

The cut is in FICA, the funding source for your social security retirement benefits. This is a right wing wet dream.

Obama is calling it a cut to payroll taxes. I heard him say those very words on a radio report today.

[merh]

1. Any money taken from our paychecks is a tax.

Whether that tax is used for Social Security or other federal purposes, it is still a tax.

[dflprincess]

2. FICA is also known as the "payroll" tax

I learned this back when I worked for a small company and did payroll. This is because the tax is the same percentage on everyone's wages (up to the cap) and also because the employer matches the tax on the payroll.

The other taxes taken out of your check are referred to as "withholding". These taxes are "withheld" until you reconcile with the government at the end of the year and you either wind up sending them more or they send you some of what the "withheld".

Though, unless you are familiar with how the terms get used when taxes are caluclated, most people do think of all the taxes taken out of their checks as "payroll taxes".

Other than that, what you said about it being a Republican wet dream is spot on - and we can only wonder why Obama agreed to help undermine Social Security. - Though given who he appointed to the Catfood Commission I suppose we really shouldn't be surprised.

[Art_from_Ark]

3. You are right

It's a 16%, maybe 32% cut in FICA contributions. It's an ostensible 2% increase in take-home pay. For someone making $300 a week, that would amount to a whole $6 extra a week.

[Robb]

4. Heh. When you're on your third year without a COLA increase, 2% looks pretty good.

;)

[Art_from_Ark]

6. But do they deduct FICA tax

from a Social Security check? :shrug:

[Robb]

7. I'm talking about a paycheck.

...I haven't seen a Social Security check up close, just yet. ;)

[Art_from_Ark]

11. I can understand how that bit of money can be important

I was in that situation for many years, and may end up back in that situation. But the way they are doing it is suspect. Instead of giving everybody a 2% increase in take-home pay by reducing employee SS contributions by 32%, why not just give a rebate to anyone who is working minimum wage or is at poverty-level, equivalent to the FICA reduction, but coming from the general fund? The way they've got it now appears to be little more than a back-door approach to crippling the Social Security system.

[nashville_brook]

5. amen. doublespeak.

[Cerridwen]

8. At the end of the year, you'll pay income tax on that "extra" 2%, too.

That "extra" 2% is now reported beginning line 7 of form 1040.

[kath]

13. Several people here have said that, but it doesn't make sense to me how this would happen. Do you

have a link?

[jtuck004]

16. Actually you report your taxable income from W-2 box 1.

Because FICA taxes are not deductible, this won't change the amount of the tax paid on the income for most people, and it won't increase the amount in Box 1.

On the other hand it does add to the nation's debt, because part of the wording in the tax package moves money from the general fund to the SSA to cover the expected loss from taxpayer contributions.

Most taxpayers will get from a few dollars up to a couple thousand (if you make 106K or so, because it stops there) over the course of a year.

On the other hand, if you look at the costs of the total package, per Alan Grayson and some other sites, it adds roughly $3500 to the national debt, which will be money owed by every one of the 300,000,000 or so people in the U.S. And if they don't get it paid off, it will be a legacy for future generations. So it could necessitate a tax increase in the future.

But some will be able to absorb that easier than others. For example, the top 1% of wage earners will get a cut of almost $77,000 in their taxes, while the lowest 30% get almost $400, and the next 30% above them get almost a thousand, according to Center for Tax Justice.

So while it is inaccurate to say reducing the payroll tax will increase someone's income tax, it would be accurate to say that most of us are about to get a massive screwing by having to absorb that debt because we aren't asking that the wealthiest Americans pay their fair share.

Does that help?

[kath]

18. Thanks. Exactly what I was thinking - FICA taxes not deductible, so employee's INCOME tax will

remain exactly the same, contrary to what some here have said. Thanks for clarifying!

I'm disgusted at this "poison pill" effort to undermine Social Security and increase national debt - way to totally screw over our kids and grandkids, you "Democratic" fuckers!

My line in the sand has been crossed. REAL Democrats do not give tax cuts to the wealthy. Not ever.

[jtuck004]

20. Very true - this was the party that stood in front of the most vulnerable.

But I think things have changed.

[Statistical]

22. False.

A change in payroll tax doesn't change the amount of taxable income.

If in 2010 you had a $50K job (assume no 401K contributions, or health care contributions) you have taxable wages of $50K.
In 2010 you pay 6.4% in SS taxes but you still have taxable wages of $50K.
In 2011 you pay 4.4% in SS taxes but you still have taxable wages of $50K.

The amount reported on the W-2 doesn't change thus the amount put on your 1040 doesn't change.

No matter how many times you make that false claim it won't come true.

[TheKentuckian]

9. Even more appalling is that Obama calls it one of his priorities.

Which means it is probable that he gave the TeaPubliKlans a concession for their wet dream.

[Igel]

10. What lie?

Obama called it what it is.

FICA and Medicare taxes are called payroll taxes. They are not income taxes.

While I think what they're doing is a mistake, nonetheless there is not cut to FICA revenues, since the "cut" is really a "bail out" or "buy out." The U. of Calif. schools did this in the '90s: As the Regents raised fees the legislation gave the UC system money to reduce those fees. Officially the fees were high, but "paid for" by the state legislature.

So here the full employee-side FICA amount isn't being deducted; but that 2% of your income that no longer goes to FICA is being replaced by general tax revenues.

Since the bottom 40% or so of US taxpaying units have zero net tax liability (after deductions and tax credits), that means their 2% is effectively being paid by the upper 60% and by increasing the national debt.

Moreover, this only funds those who currently receive Social Security. FICA probably didn't cover Social Security benefits for this year so none of it was "saved"; that's likely to be the case next year, even with the general-revenue reimbursement of the payroll tax cut. Note that if FICA taxes don't cover expenses difference had to be made up from reserves--the Social Security Administration has some cash reserves, but any additional would have to come from the trust fund. Meaning that general revenues has to buy back some of the special-issue securities that are the entirety of the trust fund. SS's deficit just gets added directly to the national debt at this point.

[Kalyke]

12. I'm takin' my "tax cut" (groan) and saving it.

I'm not spending that sucker. I WANT it to go to my social security. Can I do that?

[Edweird]

14. That is affirmative. RW policy from a "Dem" president. Seems to be a pattern there.

[zalinda]

15. Question?

So your FICA 'tax' is reduced, what about the employer, does he also get a tax break. Employers match the FICA funds that come out of your paycheck, so doesn't the corporations make out on this too?

Oh, and btw, from what I read, the repubs didn't ask for this, Obama OFFERED it to them in his 'negotiation'. The repubs walked out of that room looking like 'the cat that swallowed the canary'.

zalinda

[some guy]

17. No.

The employer portion paid to fica isn't reduced.

I think I read that in a Robert Reich column on this board; I'll see if I can find it.

well, I can't find where I read it, so I did a search for payroll tax cut holiday + employers and got numerous hits that all say it doesn't reduce the employer portion.

Here's one.

http://www.theatlantic.com/business/archive/2010/12/payroll-tax-cut-is-poorly-structured/67690/

[Statistical]

23. No. In 2010 it is 6.4% employee & 6.4% employer. In 2011 it is 4.4% employee & 6.4% employer.

[Name removed]

19. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Statistical]

21. "A cut in payroll taxes" = "A cut in FICA".

Payroll taxes = FICA taxes.

They are synonyms.

The term payroll taxes is used to differentiate from income tax withholdings. The amount of federal withholdings taken from your check is immaterial. You will stole owe the same amount of taxes at the end of the year. You can never reduce the amount of FICA taxes via deductions, or credits. You can never get a refund from FICA/payroll taxes.

Your rant is the equivelent of:
"Obama said there is a tax credit for hybrid vehicles. BULLSHIT. The credit is for hybrid automobiles." :)

[madinmaryland]

24. I'm going to roll that money into my 401K. There ain't going to be anything

left by the time I retire.