Beginning January 1 your FICA taxes (Social Security and Medicare) will return to their 2009 levels. In 2010, in an attempt to jump start the economy, President Obama reduced payroll taxes from 6.2 to 4.2 percent. Congress, in its efforts to keep us from falling off the financial cliff, neglected to continue this reduction and so now all taxpayers will see an increase.
Some will say that we should be glad to see this money returning to the Social Security and Medicare funds; that these programs are in severe need of significant changes if they are to remain funded beyond the next ten years.
This unexpected tax hike isn’t just a blow to working families. It will also be a shock to the economy. Economists have considered the payroll break one of the more effective ways of stimulating the economy because, as working families enjoy larger take home pay, they have more money to spend. That, in turn, helped boost businesses’ bottom lines and spur the fragile economic recovery. Many economists think it’s too early to tell exactly how much the higher payroll tax will hurt the economy, but generally agree that there will be a negative effect.
The initial amounts of the increase don’t sound so bad…after all, it’s spread out over a year. But imagine this: A family making $50,000 per year (not rich by any means) will now see an increase in payroll taxes of $20 per week or $80 per month, $1,000 in total. If you are that family you know that extra money is needed each month to buy groceries, buy winter coats, or maybe pay for the kids to be in a soccer program. It is real money and will be felt by real people.
It’s remarkable that despite the bluster of Team Obama not to raise taxes on the middle class they are doing just such. Did they think we wouldn’t notice?
This month as your Democratic voting friends notice their paychecks are a little smaller ask them first, who they voted for and if they truly believed Obama would keep their best interest at heart?
Do not be a low information voter.