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Reply #47: The holiday for the payroll tax is a direct transfer of a portion of the [View All]

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JDPriestly Donating Member (1000+ posts) Send PM | Profile | Ignore Sat Dec-11-10 06:36 PM
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47. The holiday for the payroll tax is a direct transfer of a portion of the
taxes paid to Social Security into the general fund.

Here is how that works.

If you are earning $50,000 and have a family of four, you will have a few hundred dollars more to take home and spend over the course of the year. That covers a lot of people so it adds up. And with the size of your family, you probably don't pay much income tax on the rest of your income so you will do a tiny bit better. (Probably not enough to notice.)

But think about a couple in their 50s, kids through school, almost no interest payments on their mortgages trying to save for retirement. At the height of their careers, between the two of them, they earn $140,000. Normally, each of them pays the FULL SOCIAL SECURITY tax on that amount plus appropriate income tax on the remaining amount. (They shelter money in 401(K) or IRA, but beyond that, they don't have any meaningful deductions or credits.)

In theory, the payroll tax holiday will leave 2% of that $140,000 in their pockets (2% of each of their salaries). In reality, the payroll tax holiday will mean that they pay whatever their tax rate is on the 2%. So this payroll tax holiday will transfer income out of the Social Security Trust Fund into the general fund.

This is the beginning of the end.

It's wrong. I can't believe that anyone in the Obama administration thought that the American people are stupid enough not to see that this so-called tax cut of 2% will not result in 2% in additional funds in the pockets of many of the Americans who pay a big share of the Social Security taxes and will rely on the program when they retire.
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