Come 2013 & Taxes May Go Up

Posted on October 22, 2021

Come 2013 & Taxes May Go Up

Taxes may go up for as many as 163 million workers if Social Security payroll taxes that are due to expire this year are not extended. In the bitter battle of elections, the issue that can mean $1000 additional taxes to a typical worker remains under the cover.

Neither the Republicans nor the Democrats are taking up the issue. According to http://www.huffingtonpost.com/2012/10/21/payroll-tax-cut-obama-romney_n_1997274.html: “Republicans question whether reducing the tax two years ago has done much to stimulate the sluggish economy. Politicians from both parties say they are concerned that it threatens the independent revenue stream that funds Social Security.

They are backed by powerful advocates for seniors, including AARP, who adamantly oppose any extension.”

Tax issues directly impact every citizen, and politicians from both the parties are reluctant to touch the issue where they cannot benefit taxpayers by continuing with the cut in payroll taxes.

Half of Social Security is paid by employers and half is paid by employees. For two years, 2011 and 2012, the share paid by employees was reduced to 4.2% from the earlier 6.2%. That helps save a $1000 a year for somebody who earns $50,000 annually.

Delving deeper into the issue, Huffington Post adds: “The beauty of the tax cut is that it shows up in weekly paychecks, giving workers more money to spend or save. The downside is that some workers may not notice a $19-a-week increase in pay, making them unlikely to credit the politicians who made it happen.

Under the law, Congress is reimbursing Social Security for the lost revenue, estimated at $103 billion in 2011 and $112 billion in 2012. But Congress didn’t cut spending or raise other taxes to offset the lost revenue, so the payroll tax cut is being financed with borrowed money, adding to the national debt.

Democrats are more willing to defend the tax cut, saying it helped prop up the economy during a rough stretch while providing what amounted to a 2 percent pay increase to millions of middle-income workers. But they, too, are concerned about maintaining Social Security’s source of revenue.”

Although it was an experiment to help the resurrection of the economy, the benefits of the cut were not what were expected. Considering this, there is very little likelihood of the cut being extended even though the White House is not ruling out the possibility of an extension. In the air hot with politics, neither party is committing. That is the best they can do at present, it seems.