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Paying for the "payroll tax" cut
Old 12-23-2011, 11:52 PM   #1
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Paying for the "payroll tax" cut

As we know this is not really a "payroll" tax cut as it is a cut in the FICA tax rate. So with all the talk about how SS will be insolvent in X years how can these morons justify taking away from SS? Well they are morons so I guess that is as good a reason as any but that's not what I want to know.

I heard something about taxing home owners to pay for this. Does anyone have a link to explain what that entails? Will this be a tax on new mortgages, that'd really help the housing industry. Or is it a yearly tax if you have a mortgage? Or is it a tax on your house even if your mortgage has been paid off?
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Old 12-24-2011, 12:46 AM   #2
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In the long run, it will be easy to raise the maximum amount that is subjected to this tax. It was $106,800 in 2011 and will be $110,100 in 2012. There is really no reason why the limit can't be changed to $150,000 or even unlimited.

To make things more progressive, they could make this tax progressive as well.
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Old 12-24-2011, 07:08 AM   #3
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Does the payroll tax cut reduce the amount of Social Security that we will collect? I have not been able to find any info?
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Old 12-24-2011, 07:20 AM   #4
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Does the payroll tax cut reduce the amount of Social Security that we will collect? I have not been able to find any info?
Your social security pension is calculated based on your eligible earnings, so these reductions should not affect it.
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Old 12-24-2011, 07:35 AM   #5
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Originally Posted by veremchuka View Post
I heard something about taxing home owners to pay for this. Does anyone have a link to explain what that entails? Will this be a tax on new mortgages, that'd really help the housing industry. Or is it a yearly tax if you have a mortgage? Or is it a tax on your house even if your mortgage has been paid off?
what I read was that a slight fee increase would be charged on every NEW government backed loan, ie Freddie & Fannie, but that it wasn't fully decided yet. It's hard to believe that such a fee could cover the whole tax reduction though.
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Old 12-24-2011, 07:35 AM   #6
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In the long run, it will be easy to raise the maximum amount that is subjected to this tax. It was $106,800 in 2011 and will be $110,100 in 2012. There is really no reason why the limit can't be changed to $150,000 or even unlimited.

To make things more progressive, they could make this tax progressive as well.
+1 the mystery to me is why they haven't just made the change. I don't think that anyone earning $106,800 to $150,000 would be upset, particularly if they know that their SS will be more secure as a result.
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Old 12-24-2011, 07:37 AM   #7
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Think of this as a tax refund from the general revenue or any other unfunded tax cut. They collect less money through the payroll tax (thus Payroll Tax Holiday) but they make up the difference to the SS Trust Fund by issuing an obligation from general revenue. This is just like spending SS Trust Fund monies on wars or anything else we have done in the past. It is simply more deficit spending. No better or worse than continuing the temporary Bush Tax cuts last year.
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Old 12-24-2011, 07:43 AM   #8
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Funding for the bill is an increase of 0.1% (one-tenth of 1 percentage point) in home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration.
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Old 12-24-2011, 07:49 AM   #9
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Back when I was w*rking at MegaCorp I remember learning one year after a promotion the I would not have to pay the payroll tax in the months of November and December. I was amazed and pleased. But it truly would not have made any difference.
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Old 12-24-2011, 08:06 AM   #10
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Funding for the bill is an increase of 0.1% (one-tenth of 1 percentage point) in home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration.
that the lenders will pass onto borrowers in the form of either higher fees or higher interest rates, so certain homeowners will pay the bill.
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Old 12-24-2011, 08:09 AM   #11
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More of the same...

Steal from one program (SS) to throw bread to the masses...
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Old 12-24-2011, 08:30 AM   #12
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The corker would be if and when those paying the most into FICA wind up having their FICA benefit scaled back through some sort of means testing.
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Old 12-24-2011, 08:32 AM   #13
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that the lenders will pass onto borrowers in the form of either higher fees or higher interest rates, so certain homeowners will pay the bill.
Actually only those who re-fi or buy will be affected, if you already have a mortgage, you are set.
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Old 12-24-2011, 08:39 AM   #14
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Yes, I know. That is why I said certain homeowners.
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Old 12-24-2011, 09:21 AM   #15
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I was under the impression there is no actual SS trust fund and all the payments come out of the general fund, same place income tax, social security tax and medicare tax go into.

Please correct me if I am wrong.
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Old 12-24-2011, 09:24 AM   #16
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Funding for the bill is an increase of 0.1% (one-tenth of 1 percentage point) in home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration.
I've read that other places, too, and haven't dug any deeper. Does that sound like it adds up? Reducing the payroll taxes by 2% on every working American can be offset by a .1% increase in the fees charged to the small percentage of folks who get a new mortgage? Maybe the time windows are different: 2 months of tax cuts paid for by 12 months of increased mortgage fees.
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Old 12-24-2011, 09:41 AM   #17
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Maybe the time windows are different: 2 months of tax cuts paid for by 12 months of increased mortgage fees.
You don't give that bunch in DC enough credit. They are much more creative than a mere 12 months:
Quote:
Even though the tax cut approved Friday extends for only two months, a small fee on loan amounts will be levied for a decade on all mortgages sold to housing finance giants Fannie Mae and Freddie Mac, which control about 60 percent of the nation’s mortgage market.
Mortgage fees paying for tax cut - Spokesman Mobile - Dec. 24, 2011
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Old 12-24-2011, 10:21 AM   #18
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I was under the impression there is no actual SS trust fund and all the payments come out of the general fund, same place income tax, social security tax and medicare tax go into.

Please correct me if I am wrong.
We have had lots of threads that address this topic. There is a SS Trust Fund. SS was originally a pay-as-you-go proposition. The Payroll taxes were supposed to pay expenses. As the boomer retirements loomed and anticipated outlays grew Congress raised the Payroll Tax to generate a surplus intended to partially fund the boomer bump. That increase resulted in a huge surplus in the 90s in anticipation of the boomer retirements. However, as designed, the funds that entered the Trust Fund from our payroll taxes were loaned to the general fund to pay current obligations (i.e to support deficit spending). Those loans were backed by IOUs from the Treasury (not materially different than the IOU you would get if you bought Treasury bonds). None of this would have been a significant problem if we kept the deficit at a reasonable level. We failed to do that big time. The upshot is that we have a debt problem and will have a hard time meeting our obligations without a good deal of restructuring.
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Old 12-24-2011, 10:29 AM   #19
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Back when I was w*rking at MegaCorp I remember learning one year after a promotion the I would not have to pay the payroll tax in the months of November and December. I was amazed and pleased. But it truly would not have made any difference.
But don't go announcing that your take-home pay is bigger. My spouse told the story of a colleague who did that and everyone figured out their salary. It pissed off the folks who did the same job for less pay.
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Old 12-24-2011, 10:41 AM   #20
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Even though the tax cut approved Friday extends for only two months, a small fee on loan amounts will be levied for a decade on all mortgages sold to housing finance giants Fannie Mae and Freddie Mac, which control about 60 percent of the nationís mortgage market.
I'm not anxious to pay taxes in general but this is one tax I think I should be paying. I think SS should remain vital for the long term. Also, when they reduce FICA and replace the funding out of general revenues it makes it seem more like a welfare program.

I'm also amazed at the replacement funding - heard on the news that an affected mortgage holder would pay an additional $4,000 on a 25-year $250K mortgage - maybe someone can do the math to confirm. Doesn't seem to be a bargain to me when what we're getting is two months of FICA tax relief.
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