Our View: Payroll tax reality sets in
The bold headline on a story in Sunday’s Business section screamed “STICKER SHOCK,” and the news story explained how many workers were being surprised this month when they got their first paycheck of the new year.
The take-home pay amount in that 2013 check was notedly different — significantly lower. “But didn’t that fiscal cliff agreement raise taxes only for those ‘rich’ people that President Obama said could afford to pay more in taxes?” many workers asked.
Well yes. The rich pay higher tax rates under the fiscal cliff deal, but that agreement also allowed a payroll tax reduction approved in 2010 to expire. So, all of us drawing a paycheck saw the payroll tax withholding amount rise. Now, that was a bad thing because, these days, we all could use that extra cash. But it was a good thing, too, because the extra money being withheld will go into Social Security Trust Fund coffers.
That’s where the money was going before the action in 2010 when President Obama and Congress authorized a temporary reduction of the Social Security payroll tax that workers pay. The 2010 action dropped the rate to 4.2 percent in an attempt to provide some economic stimulus. But now, the rate has jumped back up to 6.2 percent, the level that had been in effect for years (your employer also pays 6.2 percent of your pay into Social Security).
This down and now up movement of the payroll tax rate has generated plenty of partisan political jabber. Back last year during the presidential campaign, the reduction was labeled by President Obama and Democrats as a middle-class tax cut they had given. Now, the increase is being labeled by Republicans as a middle-class tax hike by Obama and Democrats.
These politically charged descriptions of the tax rate reduction and recent increase demonstrate again just how much partisan politics has entered into the decision-making process regarding Social Security. And the impact of partisan politics — from both political parties — has been to delay in-depth study and action to ensure that Social Security meets is current obligations, and that reforms and/or modifications are made for the future.
One would hope that such an examination of Social Security could occur outside an umbrella of highly partisan politics and rhetoric. It must if reasonable solutions are to be found.