Payroll Tax Reduction?

[thundley4]

Can anyone explain this to me?  Last year as an economic boost the feds decided to take out less money for Social Security and are now debating about extending it again.

Democrats want to do it, but Republicans want it paid for by cutting something else. That's all well and good, but Social Security is already paying out more than is currently coming in in FICA receipts.  So money is already coming fro the general fund to go to Social Security payments. 

My question  is this, and I haven't seen it addressed in any of the coverage on this story.

Social Security benefits are based on lifetime earnings and money paid into FICA.  Does that mean that future retirees will see reduced benefits because of this Payroll Tax reduction?  (Yes, I'm assuming that Social Security will be around for this question to have merit.)

[NHSparky]

Oh, heavens--what are you doing asking QUESTIONS, you peasant?

Back to work, and NO POTATOES for you this week!

ETA: Just further proof that anyone under the age of 50 who thinks SS will be there in any meaningful way for them is a fool.

[sybilll]

Can anyone explain this to me?  Last year as an economic boost the feds decided to take out less money for Social Security and are now debating about extending it again.

Democrats want to do it, but Republicans want it paid for by cutting something else. That's all well and good, but Social Security is already paying out more than is currently coming in in FICA receipts.  So money is already coming fro the general fund to go to Social Security payments. 

My question  is this, and I haven't seen it addressed in any of the coverage on this story.

Social Security benefits are based on lifetime earnings and money paid into FICA.  Does that mean that future retirees will see reduced benefits because of this Payroll Tax reduction?  (Yes, I'm assuming that Social Security will be around for this question to have merit.)

You are correct, and I am not sure what Obama's end game on this is since he claims to represent low income people.  They have also changed the COLA to the chained CPI which gradually lowers the Social Security payouts every year.  I handle my parent's affairs, and their Social Security COLA was in fact impacted by the chained CPI for 2012, after no increases for 3 years, but it got no media coverage whatsoever. 
Chained CPI explained here:  http://www.bls.gov/cpi/cpisupqa.htm
It assumes that as you receive lesser increases you will adjust your spending accordingly.  Not that prices have not gone up, just that you will adjust your consuming habits to account for the price increase. 
Even liberal sites like FireDogLake recognize the harm it does to senior citizens:  http://news.firedoglake.com/2011/07/08/chained-cpi-not-only-a-social-security-benefit-cut-but-a-regressive-tax-increase/

[DumbAss Tanker]

The payroll tax holiday is basically a 'Free crack' program.  It does not make any damned sense at all, economically.  It does nothing but cut the throat of a program that is already in fiscal trouble but politically unstoppable, accelerating our arrival at a crisis that looms for it ahead.

It puts some money out into the economy but in chump-change sized parcels that boil down to nothing more than helping people with their monthly gas bills for commuting, or buying their groceries, since costs of both have gone up steadily, but outside any pay raise systems that take the CPI into account, since it doesn't count either one of those things.

The entire thing is stupid and short-sighted.  If we're going to have SS, and it seems politically inescapable that we do, we have to pay for it.   

[NHSparky]

DAT is right.  It's basically a vote-buying scheme and putting it back at 6.2 percent only enables the one side to label the other as callous cruel tax raisers in an election year.

Problem is, even guys like me who maxxed out their SS contribution only "saved" $2000.  Guess where that went?  Higher fuel costs, higher energy costs, higher food costs, higher clothing costs, higher insurance premiums, higher state and local taxes, property taxes, vehicle license fees, etc.

Said it before, will say it again--just give me the money I've paid into the system (I'll forgo the employer match) and let me invest that money as I see fit.  In return, I'll never make a SS claim or ask for Medicare.  Ever.

But we know that's never going to happen because the whole government-run Ponzi scheme would come crashing down.

[Gratiot]

The payroll tax holiday is basically a 'Free crack' program.  It does not make any damned sense at all, economically.  It does nothing but cut the throat of a program that is already in fiscal trouble but politically unstoppable, accelerating our arrival at a crisis that looms for it ahead.

The entire thing is stupid and short-sighted.  If we're going to have SS, and it seems politically inescapable that we do, we have to pay for it.

I agree, entirely, although at this point in our economy, I'm not sure if ending it would be worse than leaving it as is for a bit longer.

Regardless, it's entirely a political rallying point rather than sensible debate right now, IMO.

[thundley4]

I still haven't found anything relevant to question about future retirees seeing reduced benefits. However, the lost funds are being replaced by from the general fund, so this is adding to the US deficit.


The extra money that we see in our checks from this reduction will be taxed and in some cases might bump people into a higher tax bracket than before.

[Gratiot]

The extra money that we see in our checks from this reduction will be taxed and in some cases might bump people into a higher tax bracket than before.

The few percentage points of additional income, could easily be worked by a tax professional, to avoid bumping a person into a higher bracket than before.  Although it could complicate things for a person already at the edge of the AMT. 

[DumbAss Tanker]

The few percentage points of additional income, could easily be worked by a tax professional, to avoid bumping a person into a higher bracket than before.  Although it could complicate things for a person already at the edge of the AMT. 

Considering the modest amount involved in this particular tossed bone, that would either be a zero net gain or a loss.

[NHSparky]

I still haven't found anything relevant to question about future retirees seeing reduced benefits. However, the lost funds are being replaced by from the general fund, so this is adding to the US deficit.


The extra money that we see in our checks from this reduction will be taxed and in some cases might bump people into a higher tax bracket than before.

No, it doesn't affect AGI.

[I_B_Perky]

Can anyone explain this to me?  Last year as an economic boost the feds decided to take out less money for Social Security and are now debating about extending it again.

Democrats want to do it, but Republicans want it paid for by cutting something else. That's all well and good, but Social Security is already paying out more than is currently coming in in FICA receipts.  So money is already coming fro the general fund to go to Social Security payments. 

My question  is this, and I haven't seen it addressed in any of the coverage on this story.

Social Security benefits are based on lifetime earnings and money paid into FICA.  Does that mean that future retirees will see reduced benefits because of this Payroll Tax reduction?  (Yes, I'm assuming that Social Security will be around for this question to have merit.)

I'm not sure. Now I may be wrong, wouldn't be the first time, but I always thought it was based on your SS taxable income. Not how much you contributed. The reason why I thought this is because of health insurance... or maybe it's the 401k... drops your SS taxable income.

Interesting question. I went to the SS site and there is nothing on it.