Obama Signs New Tax Bill - Soc Security Taxes Cut???

[Midpack]

Won't comment on extending Bush tax cuts, but I am glad they can move on to other legislation. But I didn't know this was part of it, I must be reading this part wrong...

Social Security taxes would be cut by nearly a third, from 6.2 percent to 4.2 percent, for this coming year. A worker making $50,000 would save $1,000; one making $100,000 would save $2,000.

But the payroll tax cut also means that workers will face an increase in 2012 if the full 6.2 percent rate is restored.

I am still paying Soc Sec, so maybe you'd think I'd applaud this, but have we gone mad (with deficits as far as the eye can see)?

Obama salutes spirit of compromise, signs tax bill | General Headlines | Comcast.net

 

[ronocnikral]

i was curious what the reasoning is behind this. well, i know the reasoning...but it makes no fiscal sense. maybe they should have cut benefits for everyone and raised the full retirement age (for everyone) as well...

nonetheless, i won't ramble on too long, as it could give the appearance that I am complaining about this over $2000 before tax gift...

 

[kyounge1956]

i was curious what the reasoning is behind this. well, i know the reasoning...but it makes no fiscal sense. maybe they should have cut benefits for everyone and raised the full retirement age (for everyone) as well...

nonetheless, i won't ramble on too long, as it could give the appearance that I am complaining about this over $2000 before tax gift...

Now that it's been signed, I'm trying to figure out how the one year reduction in SS tax will affect my spendable income next year, and getting my brain all wrapped around the axle. The normal SS tax rate is ~6%, but next year it is reduced by 2 percentage points, so the extra amount I will see on my paycheck is 2% of my gross salary, minus the federal income tax on that amount—right? (There is no state income tax where I live). I was thinking the reduction of the SS tax would make my taxable income go up by the 2 percentage points, but if I am reading my W2 (from 2009) right, the SS tax paid is not excluded from the "wages, salaries & tips" I pay income tax on, so a change of SS tax rate won't affect the amount of income tax due.

 

[ronocnikral]

i assume the money is not exempt from federal income taxes. i could happily be proved wrong on this...

 

[Texas Proud]

i assume the money is not exempt from federal income taxes. i could happily be proved wrong on this...

You already pay FIT on this income...


An example... your salary is $100K with nothing taken out for health care, retirement etc. etc...

You will have to pay SS & medicare on the $100K.... but you also pay FIT on the $100K... (IOW, your taxable income is not reduced by your SS)...

So, this is a full $2,000 in your pocket

 

[keegs]

With half the households paying no FIT, what's left but a pass on retirement funding...

Where'd all those deficit hawks go?

 

[donheff]

I am still paying Soc Sec, so maybe you'd think I'd applaud this, but have

i was curious what the reasoning is behind this. well, i know the reasoning...but it makes no fiscal sense

Can't say I like any of this but the reasoning is simple. Obama wanted another stimulus plan to goose the economy under the theory that unless the economy gets restarted we will not get back on a good footing. The one time deficit bump will not be as bad as potentially years of slow growth if we push austerity immediately. By compromising with the GOP he got his stimulus although some economists (e.g. Krugman) think it is not enough. The GOP wanted no tax increases, period (the over $250k deal, the hedge fund managers' rates), and were willing to accept another bump in the deficit to assure that.

It really doesn't matter much one way or another. If these guys can't come together on a radically changed approach (The Deficit Commission or other) over the next few years we are in deep doo doo.

 

[Midpack]

It really doesn't matter much one way or another. If these guys can't come together on a radically changed approach (The Deficit Commission or other) over the next few years we are in deep doo doo.

+1

 

[ERD50]

..., but have we gone mad (with deficits as far as the eye can see)?
...

No, not at all. It's the continuation of the same madness we have had all along!

IMO, donheff has it right. If you want to stimulate the economy, it makes sense to cut taxes. But without some spending reduction plans, we are just sinking in deeper in the long run. And since SS isn't really separate from other revenue/spending, it's rather immaterial where the cuts come from (other than SS cuts help the lower income people the most). It's less money in the pot.

Barring some new renaissance in US competitiveness (we come up with some kind of 'secret sauce' the world wants that we make better/cheaper than everyone else), I don't think this is going to end well for the US. I think our standard of living is going to have to move closer to the world mean (which I expect to keep rising).

Or we hit some critical point in the deficit, it becomes a crisis, and things turn ugly. I'd prefer a gentle erosion, unless the critical point actually triggers meaningful change, without too much collateral damage (unlikely, IMO). No different than an individual trying to live high on the hog on debt rather than living within their means. Some day those chickens come home to roost (staying with the farm animal metaphor here).

-ERD50

 

[FreqFlyer]

I'm delighted to get a tax cut next year as I earned too much to qualify for the Making Work Pay tax credit passed in the original Stimulus package.

I too worry about how we'll pay all this borrowed money back as a country. At some point we've got to start living within out means.

 

[HFWR]

Where'd all those deficit hawks go?

 

[Westernskies]

So, this is a full $2,000 in your pocket

or, in the case of those still working, in their 401k plan.

 

[LOL!]

This SS tax-cut just replaces the "Make Work Pay" tax credit of the past couple of years, so it is not really a big deal or anything new just because it has a different label.

Non-working retirees do not get the cut and some workers with low-incomes will receive less through the cut than they did in previous years with the "Make Work Pay" credit.

Even though the government wants you to spend your $2000, you should probably invest it for your retirement in a sort of self-directed pension plan.

 

[chinaco]

Didn't make much sense to me either... if SS is projected to have funding problems.

My intepretation... Trade-off deals for a quick money grab. Rich keep tax cut (which benefits wealthier more that middle or lower)... extend unemployment for unemployed (give away several years of income).... give the middle class more spendable money next year (SS payroll cut) hoping it will stimulate the economy.


IMO - Both sides of the aisle are irresponsible when it comes to the national debt. Just a few months ago there was a screaming match over the debt... now that the politicians get what they want (rather than what they say)... they all sell out... scr3w it... let's all grab a handful!

 

[haha]

Reading this thread I rememberd an hilarious book from the 60s named The Magic Christian, by Terry Southern. For any who have not read it, here is a blurb:

"One of the funniest, cruelest, and most savagely revealing books about American life ever written, The Magic Christian has been called Terry Southern's masterpiece. Guy Grand is an eccentric billionaire — the last of the big spenders — determined to create disorder in the material world and willing to spare no expense to do it. Leading a life full of practical jokes and madcap schemes, his ultimate goal is to prove his theory that there is nothing so degrading or so distasteful that someone won't do it for money. In Guy Grand's world, everyone has a price, and Guy is all too willing to pay it. A satire of America's obsession with bigness, toughness, money, TV, guns, and sex, The Magic Christian is a hilarious and wickedly original novel from a true comic genius."

 

[samclem]

Reading this thread I rememberd an hilarious book from the 60s named The Magic Christian, by Terry Southern. "

This is one of the funniest books I've ever read, but I no longer mention it in polite company. I was surprised to find that a lot of folks didn't find the book funny at all, and think less of anyone who laughs along with Guy Grand.

 

[ziggy29]

I am still paying Soc Sec, so maybe you'd think I'd applaud this, but have we gone mad (with deficits as far as the eye can see)?http://www.comcast.net/articles/news-general/20101217/US.Tax.Cuts/

Yes, it's more kicking the can down the road, and frankly we can't keep doing that. We have to make tough decisions that require sacrifice. But because both sides have sacred cows they aren't allowing to be hurt, either nothing gets done or they kick the can. It's pretty infuriating, IMO.

 

[M Paquette]

Yes, it's more kicking the can down the road, and frankly we can't keep doing that. We have to make tough decisions that require sacrifice. But because both sides have sacred cows they aren't allowing to be hurt, either nothing gets done or they kick the can. It's pretty infuriating, IMO.

Next spring, the US national debt will be up against the national debt ceiling. Even if the government were to magically clip all spending, including Social Security and Medicare, to zero, if we're right at the limit the government wouldn't be able to cover interest on Treasury notes and bonds in a timely manner. The limit will have to be raised even if the government manages to immediately move toward a balanced budget, an unlikely event.

With the full faith and credit of the US Government on the line, I eagerly await the fantastic tales to be told by all parties to this event, especially the ones who so recently campaigned on balancing the budget, and who have just indulged in another round of bread and circuses for everyone, but especially for their campaign contributors.

I got yer sacred cows right here. USDA Choice, by the pound.