The Right Opinion

The Payroll Tax

By Rich Galen · Jan. 14, 2013

The big hoo-hah over taxes we had to suffer through last month had to do with income tax rates and some specialty items that largely attached to corporations.

As you may know if you've ever made the mistake of saying “about half of those who work pay no taxes at all” in front of a Liberal, everyone who shops pays sales taxes, everyone who drives pays gasoline taxes, and everyone who works pays … payroll taxes.

Payroll taxes, as the term is typically used, are those you pay into the Social Security system (officially known as Old-Age, Survivors, and Disability Insurance and Medicare (officially known as Medicare's Hospital Insurance program – Part A).

Taken together, these are known as “FICA” taxes for the Federal Insurance Contributions Act that authorized them.

Under current law you (and your employer if you are not self-employed) each pay 6.2 percent of your gross pay into the Social Security program up to $113,700 of income. After that you're off the hook.

You and your employer also each kick in an additional 1.45% to fund the Medicare Part A (the hospitalization part) up to … forever. There is no income cut off.

In fact, I believe, that at the $250,000 family income level you will pay an additional 0.9 percent into the Medicare program even though you will not get any better medical care for the price of it.

Note: You know better than to take tax planning advice from me. Your Mileage May Vary.

Put these two taxes together and – bibbidy-bobbidy-boo – what do your get? 15.3 percent of your income goes to the Feds. In addition to whatever income taxes you might be paying.

If you have a job on which your employer withholds taxes, you each pay half: 7.65%. But if you are self-employed, as in being a contractor rather than an employee – you pay the whole 15.3% out of your pocket.

All that as predicate to what you will find – or have found if you've received your first paycheck of 2013 – the payroll taxes have gone up and the amount in what we used to call your “pay packet” has gone down.

Part of the deal the Congress and the President reached ended what was known as the “payroll tax holiday.” As part of the panic to avoid a full-blown depression, it was decided that it would be a good idea to reduce the Social Security tax by two percentage points: From 6.2 percent per payer to 4.2 percent per payer.

The loss to the Social Security fund were to be made up by transfers from the general fund.

I'll wait until you stop screaming at your computer screen. I know the general fund is about $16 trillion in debt. I'm just the messenger.

Anyway this increase in payroll taxes will be noticed by most of us. According to Neil Irwin writing in the Washington Post, “For someone who makes the U.S. average for private sector workers of $818.69 a week and is paid every other week, that adds up to a reduction of $32.75 in each paycheck. For higher earners, anyone making over $113,700 annually, each bi-weekly paycheck will decline by $87.46.”

Nearly everyone in official Washington agrees this is good policy, but Fox News interviewed a young woman who was incensed at the increase. She wailed about the macro-economic disaster this return to normal rates portends: “This is an impediment for future economic growth. It's going to make it harder for young people like myself to get married, find a better job, you name it,” she said.

But a little later in the article, reporter Joshua Rhett Miller, zeroed in on the whole “future economic growth” issue when he wrote that the young woman, “admits the hike won't completely alter her spending, but the [recent college] graduate said she will definitely have it in mind when it comes to leisure activities and entertainment.”

An additional housemate for the beach house this summer? Oh, the horror.

But she is correct in this regard: Just about every Member of the House and Senate; the President and Vice President; the Treasury Secretary and the Fed Chairman all bellowed that we needed the fiscal cliff deal to avoid raising taxes on every single working American.

After, as Shakespeare wrote “all the sound and fury, signifying nothing” over income tax rates, they, indeed, raised taxes on every single working American.

Nicely played.

On the Secret Decoder Ring page today: Links to the Fox News and Washington Post articles as well as the full “sound and fury” quote.

Also an amusing Mullfoto from my favorite village, Old Town Alexandria, Virginia.

Copyright ©2012 Barrington Worldwide, LLC | Mullings.com

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8 Comments

Doktor Riktor Von Zhades in Western KY said:

I certainly hope that everyone the re-elected the Usurper to the W.H., received this rude awakening. I wonder how many of them are shocked, that after repeated warnings that this would happen, they still pulled the left-sided lever in the voting booth. Well done useful idiots.

Monday, January 14, 2013 at 9:49 AM

Alex in NJ replied:

Don't be silly...a large percentage of Obama voters don't work, so there won't be any big surprise when they roll out of bed at 11am Friday.

Tuesday, January 15, 2013 at 9:41 AM

Wayne in Hinesville, GA said:

Liberals never look at what is actually occuring around them. They think they are safe in their delusional world where they believe the government is the answer to all their problems. It never fails to amaze me the amount stupidity running rampant in their world. The ones who work are so stupid they see nothing with their taxes supporting the parasites living among us. If they can't find a job they don't understand that allowing illegal aliens to become citizens means more people competing for jobs. The imbeciles deserve everything that happens to them but unfortunately we will also have to suffer right along with them.

Monday, January 14, 2013 at 11:52 AM

wjm in Colorado said:

With the Marxists in charge, is it any wonder that the only result is shared misery for all? Useful idiots indeed, of course they may not notice the tax increase on their welfare check. Way past time to tie the right to vote to actually paying taxes. No stake in the game, no vote. Its just too bad that will never happen, as the leaches outnumber the producers; we have run out of others money, and the collapse will come.

Monday, January 14, 2013 at 11:57 AM

Howard Last in Wyoming said:

Another item none of the crooks and/or mental midgets in Washington have addressed is Income Tax Withholding and Estimated Tax. It was put in place by Joe Stalin's best friend FDR to pay for WW-II. I believe the war has been over for some 67 years, but I may be mistaken. It is sort of like the Excise Tax for the Spanish American War. That only lasted for some 100 years.

Imagine the uproar if all citizens had to write a check on April 15. And no more would the great unwashed say, "I don't pay taxes, I get money back." What I don't understand, is if you overpay how come the govmint does not have to pay you interest. If you underpay you have to pay interest. Better yet why isn't the govmint paying interest on the entire amount? Have you ever heard of a bank making an interest free loan?

Monday, January 14, 2013 at 12:00 PM

JAC in Texas said:

This is not entirely accurate. You say, "15.3 percent of your income goes to the Feds." The 6.2% paid by the employer does not come out of your income; it comes out of his. You pay 6.2% plus 1.45%, or 7.65% of your income. Your employer is paying the rest. The amount he pays is based on your gross income amount, but it all doesn't come out of your gross pay. It comes out of his bottom line.

Monday, January 14, 2013 at 3:22 PM

Jan Mason in Cambridge Ohio said:

Keep our freedoms !

Monday, January 14, 2013 at 4:53 PM

Jan Mason in Cambridge Ohio said:

Keep our freedoms

Monday, January 14, 2013 at 5:08 PM