Woke up to a Payroll Tax Increase

Chief Esparza January 4, 2013 1
Woke up to a Payroll Tax Increase

So you woke up this morning and found out that there was a payroll tax increase? Thats the Social Security, Medicare, etc taxes that are separated from your income taxes. Here’s the deal…

A couple years back, W Bush sent out advance tax refunds. Most people received a check in the mail. Free money! Not really, just some of what you might have paid at the end if the year anyway– an advance, not a rebate. This was supposed to kick start the economy. But it didnt.

When you give a check to most people in a down economy, they dont spend that money like it’s extra money. They just save it. Or pay a bill. It doesnt get pumped into the economy. A few hundred billion dollars and nothing happens.

Economists know this. You might like the idea of the government sending you a check (we’re all welfare queens in that sense), but you wont do what youre supposed to do– you wont spend it.

So a couple or three years ago when Obama was negotiating some kind of tax stimulus, the idea of a check came up again. The political advisors said, “Send them a check! Its big, theyll notice it, and itll give you political capital heading into the election!” But the economists said, “They cant notice what you give them. Lower the payroll taxes. Theyll barely notice an extra 10, 20, 60 dollars a week, and theyll spend it. This will boost the economy.”

The economists won out. And so did the economy. But you barely noticed. And in November you said, “Obama didnt do anything for me in this economy.” But he did.

The Fiscal Cliff negotiations were exactly about this kind of shared responsibility. Everyone is going to have skin in the game. Whether because we’ll lose services, see fees go up, or have our taxes go up, everyone has a responsibility to this. If you heard the phrase “Grand Bargain” at any time over the last 2 years since Obama’s Simpson-Bowles Commission came out with their plan to fix the Federal Debt, this is what it meant. It meant that we would all have to negotiate our positions and sacrifice something to fix the problem we all in some way created– apathetically in not voting or paying attention, or actively in supporting expensive social safety nets and the politicians who enacted them.

You want to see taxes go up on income over $400k? Then you’ll have to see that temporary payroll tax cut go away.

Now, I dont like the way payroll taxes are calculated. They dont tax income over $80k or so (last time I checked). And because it’s a flat tax, it means more of a person’s spending power at the bottom than at the top– its regressive, and hurts poor people more than rich people. Bullshit.

So there’s the story. You had a break for the last 2 years on your payroll taxes. And it was done that way because you wouldnt spend the money otherwise. Now it’s back to the way it was. Deal with it. You cant get something for nothing.

 

One Comment »

  1. Robert "RoBear" Olivarez January 22, 2013 at 6:32 pm - Reply

    Great review of the issue, unfortunately most just believe the lie that Obama raised taxes. Unfortunately the Democratic Party leadership has done a poor job of explaining this, and perception becomes reality. Great post!

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