Payroll tax deductions is Social Security/Medicare funding. They are playing word games here

[Robbien]

The payroll tax reduction included in Obama's "reconciliation" budget plan is deliberately mislabeled. They are talking about FICA withholding. FICA (Federal Insurance Contribution Act) withholding is how Social Security and Medicare is funded.

Since when is reduction of the funding of Social Security and Medicare a "progressive" goal? Progressives have always wanted the funding to be increased by increasing the ceiling or removing the ceiling altogether thus having the higher earners pay more.

Plus, this reduction of funding is a HUGE corporate giveaway. For every dollar an employee puts into the fund, the employer has to match it. So by reducing the FICA withholding rate, companies get a huge tax cut.

They played word games with the Estate Tax by calling it the Death Tax.
Now they are playing word games with Social Security/Medicare funding by calling it Payroll Tax.

[Pholus]

1. Shhh, you're ruining it. In two years we're supposed to be 'surprised' when it gets cut.

The deficit, don't you know.

[Donnachaidh]

9. that's gonna happen before two years - far enough from an election cycle

I expect the pukes will start tantruming while Obama promises them everything - again. And we'll hear about it after the fact.

[FBaggins]

2. AND it replaces the "making work pay" credits.

So instead of a flat $800/couple, we get 2% of the first ~$110k income... Which means that a wealthy couple could see >$4,000 in cuts instead of $800... while a minimum wage couple's cut falls to about $600.

[Robbien]

4. True, everything about this "reconciliation" is to ensure to take money from the poor

and handing it to the rich.

[BzaDem]

3. This has been debunked on DU at least 10 times. Not ONE PENNY will be taken away from the trust fund

because the full 120 billion cost of the tax holiday will be transferred from the general fund to the trust fund.

As someone said in the other thread, if you have 2 apples, and you give one away while simultaneously getting a new one from somewhere else, you still have 2 apples.

[Robbien]

5. Never debunked. Only smoke and mirrored

And this is not a TAX HOLIDAY

This is a reduction of funding of the Federal Insurance Contribution Act fund, commonly known as Social Security/Medicare.

[BzaDem]

11. You know, just because you make a false statement doesn't turn that statement true.

http://tpmdc.talkingpointsmemo.com/2010/12/unhappy-dems-mull-obama-gop-tax-cut-deal.php

"Progressive economists have worried that a payroll tax break along the lines of the one announced tonight could come back to bite Democrats if it undermined the solvency of Social Security. But officials tonight insisted that its cost to the Social Security trust fund will be reimbursed with a credit from general revenue."

[Robbien]

21. Bull crap. Officials can insist all they want. If it is not in black and white

then it is just smoke and mirrors.

Black and White says FICA tax is to be reduced.

Plus saying general revenue will reimburse FICA fund is a joke. General Revenue has been stealing from FICA fund to cover deficits for decades now.

[BzaDem]

22. Again, just because you say "it's smoke and mirrors" doesn't mean it isn't entirely true.

You can say whatever you want. You can say the Earth is flat. That doesn't actually mean the Earth is flat -- it just means you are wrong.

You are factually wrong, and this will not change no matter how many times you post the false statement you have been posting.

[Robbien]

26. Why are they using the Social Security/Medicare fund to

give this "tax holiday" if, as you say, the General Fund is going to end up paying for it anyway. Why not just directly use the General Fund (which is where our FIT withholding is deposited). If this was not a hit to social security/medicare they would adjust FIT not FICA.

[BzaDem]

27. Because the FIT only applies to people who pay income tax. A payroll tax cut affects many more poor

people, who don't make enough to pay income tax.

[Robbien]

31. They know how to give credits back to people who don't pay taxes

that's how Earned Income Credit works

Again, why use Social Security/Medicare when supposedly, they promise, cross their hearts, that the general fund will end up paying for it.

[BzaDem]

33. Because they essentially want to give everyone a 2% raise exactly up to 110k, and by far the easiest

way to do that is by lowering the payroll tax by 2%. You would have to make entire new tax brackets and credit systems to jury-rig the math to make it work under the income tax system. It would make no sense, and probably wouldn't be possible. (How would you get rid of the deductions for calculating the value? etc)

You are basically up in arms over the bank routing number printed on the check going into the trust fund for the exact same amount. That is a silly thing to worry about.

[Robbien]

37. These type of complex payroll tax withholding adjustments are made all the time

It is standard operating procedure.


What is not standard operating procedure is to change FICA tax for a change that should come from FIT tax. That has never been done. EVER.

[Statistical]

39. Not with less than 2 weeks to implement. Never not once has that happened.

Nobody said it is impossible to implement just that it takes time.

Never has there been a change in witholding that was implemented in less than 2 weeks. Never.

[Robbien]

42. In the Clinton years and Reagan years

it happened all the time. If the change couldn't be made for the first withholding, the change and an adjustment would be made on the second or third.

[Statistical]

44. No it didn't. Witholding rate changes under Reagan were approved in June. For Clinton it was Oct.

Maybe your individual company was behind.

There has never been a change to income tax rates and thus witholdings 2 weeks before the new year. Never.
2 weeks to implement, test, and deploy updates to thousands of companies is no trivial task.

[Robbien]

46. Your memory is different than mine. Last minute changes happened all the time

This argument all comes down to

You have faith that social security is safe under Obama

I have faith that Obama wants SS gone

It all comes down to faith. We have to leave it at that

[TheKentuckian]

43. Like they aren't desperately trying to get out of the two trillion they already owe Social Security.

That just adds to the stack of "worthless IOUs".

This is pure shrink the pig nonsense.

[Statistical]

47. Actually it doesn't change the stack of "worthless IOU" by a single penny.

When SSA gets $120B "cash" from payroll contributions by law it is required to use those funds to buy Treasury bonds.

Thus if you want to get technical:
$120B cash from workers - > SSA - > $120B in treasury bonds.
vs
120B cash from general fund - > SSA - > $120B in treasury bonds.

By law SSA is obligated to use any excess funds (receipts > expenses for current year) and purchase treasury bonds (hence your worthless IUO comment). Under either funding scenario there will be the exact same number of "worthless IOUs".

[TheKentuckian]

52. Pure debt. No matter how you cut it, there is less revenue.

[Statistical]

17. No it isn't. It is merely funding it by alternative source.

$120B from workers payroll taxes -> SSA
$120B from general fund -> SSA

net-net there has been no change in SSA funding. Only the source of that funding has changed.

Hence your claim has been debunked multiple times.

"This is a reduction of funding of the Federal Insurance Contribution Act fund"
100% absolutely false. There will be no reduction in funding. The $120B not paid by workers will be paid by general fund.

[haikugal]

7. but, but, but....

I thought I heard someone (repug?) say that "of course funding for Social Security depends on the government having the money...or possibly he was talking about this 'payback'...I'm not feeling very sure that this isn't the 'camels nose under the tent'. We all know they've wanted to kill SS for a long time and our Prez seems to be agreeable. I've never seen anything like the last two years...it's as though we didn't win a damned thing..the Repugs have been in charge.

[Pholus]

10. But the trust fund then has officially increased the deficit for the first time.

The WH loves them some fine print.

[BzaDem]

13. ... no. If I borrow 600 dollars and then deposit it into my bank account, no one says my bank

account created the deficit.

I created the deficit, by borrowing 600 dollars in the first place. Just like the government creates deficits every minute of every day. This is not new. Stimulus always comes from the deficit. That is the point of stimulus.

[Pholus]

14. Then why not take the money DIRECTLY from the general fund. Why link SS to the deficit?

[BzaDem]

15. Because they want to cut the payroll tax, and the payroll tax normally goes into the trust fund.

So they need to substitute payroll tax revenue with general fund revenue for a year. This is seriously not a big deal. It does not affect the trust fund by one dime.

[Pholus]

18. So ya say. 'Course what's really going to happen is in the fine print. These days.

http://www.huffingtonpost.com/rj-eskow/obamas-tax-holiday-a-pois_b_793526.html

[Statistical]

19. So how do you get that money to people. What mechanism?

Sending out checks? Based on last year tax return? What if they didn't work last year.

There is huge cost, complexity, and delay in sending out millions of check.

Reducing payroll tax contribution by 2% immediately and with minimal cost/overhead increases workers after tax pay by 2%.

[Pholus]

20. Yes, I was never good at multidimensional chess. But I did notice that tiny wording change

about the tax cuts last month from "against them" to "against permanently extending them."

I'm done with the flowery words and oration. Everything apparently needs to be read like a contract.
So, this is just such a strange manipulation of the third rail that I have to wonder a bit...

Not like I can do anything about it -- but I can watch with anticipation.

[Statistical]

23. It will be ok....

1) UI extended for 13 months. Not only does that help millions of unemployed they don't get to wait in horror each month to see if Congress will extend it another 30 days or 60 days. 13 months conveniently takes it past Christmas 2011. The first time another extension will need to be considered is January 2012.

2) Taxes aren't rising on middle class. That would be a huge blow to discretionary income and thus aggregate demand

3) 2% payroll tax reduction is in effect a 2% gross pay increase. Not a huge amount but useful in stimulating demand

4) No reduction in SSA funding. $120B from workers vs $120B from general fund.

Yes the rich get their breaks extended 2 years (possibly more). Yes estates are tax free up to $5M (still better than current year where entire estate if tax free). That is why it is called a compromise.

[Robbien]

24. Huh? Reduce FIT not FICA

Federal Income Tax withholding is usually how money is given back to people.

Reducing FICA as a mechanism to get money back to people is stupid.

[Statistical]

25. Changing witholding doesn't change taxes due.

I can make my withholding $500 or $5000 a month neither determines my level of taxation.

[Robbien]

28. Withholding changes would also mean a change in tax liability

They would change the tax rates not just the withholding rates.

[BzaDem]

29. Not for people who make too little to pay income tax. n/t

[Statistical]

32. Well now that is getting rather complex.

Complex changes to withholding tables (FIT isn't a simple wages * x but rather a complex set of tables and formulas).

Then a change to income tax structure. Changes to income tax forms, instructions, also some worksheet to ensure only those making <$106K benefit right. Of course that leaves out people who don't pay income taxes so you likely will have a whole set of equations and formulas to ensure they are included.

Also changing FIT tables now would be hugely burdensome on payroll companies & HR. We are 22 days from the new year. Usually many people take long planned vacations in late December. The bill hasn't even been signed yet. It might not make it to Obama desk till late Dec. So in what a week companies are suppose to implement changes to FIT in payroll systems across the country to be compliant with the law come Jan 1.

People come up with "simple solutions" like change FIT at the last minute, ensure it covers low income, and excludes high income, changes tax code, and includes all formulas and worksheet and then say "why is the tax code so complex".

All that..... or change SS tax rate from 6.2% to 4.2%. Yeah I think one is slightly easier to implement.

[Robbien]

34. Oh yeah, they are cutting Social Security/Medicare funding because it is easier for payroll clerks

They are running the gauntlet of defending social security/medicare funding criticism so as to make it easier for payroll companies to change their withholding.

They have never cared about making it inconvenient before and I've worked in the area for a long time.

So they write a bill stating Social Security/Medicare funding is reduced. Then they make press statements saying don't worry the funding will come from general funds. And we are to trust them.

[Statistical]

36. Nobody is cutting SSA funding.

$120B from payroll taxes -> SSA
vs
$120B from general fund -> SSA


"They have never cared about making it inconvenient before and I've worked in the area for a long time."
Name one time when FIT table changed less than 2 weeks before new year. I will be waiting because it has never happened.

[Robbien]

40. What a relief

Because you made such an assurance I can trust you and rely on the fact that since you have said nobody is cutting SSA funding, nobody is cutting SSA funding.

Forget the fact that the only thing in the bill is that FICA is being cut.

I have been assured by a DU member that FICA is not being cut so I can rely on that fact.

[Statistical]

41. Have you seen the bill?

Basically you have Obama saying two things:
1) payroll tax funding will be reduced by 2%
2) the equivalent funds will be paid from general fund.

You believe him on point 1 (without seeing the bill) and don't believe him on point 2 (also without seeing the bill).
Yeah no bias there.

Will your doom and gloom end once you actually DO see the bill?

[dkf]

35. 42% already pay no federal taxes.

[KharmaTrain]

6. Robbing Peter To Pay Paul

But that's what the federal government has always done.

The bottom line here is Obama's job. I'm sure he and his people all but eat and breathe the unemployment numbers and if you ask them one statistic that hurt them in November, that's the one they'll point to. They also know that unless that number goes down, they'll face more tough going in 2012. Thus you spend and try to fend off the wolves for another two years and hope the "status quo" means things won't necessarily get better, but they won't get worse.

For many families, the extra money is needed now...few are thinking about when they turn 65 or 67 or whatever the SSI will be when they're elligible to collect. Many don't expect there even to be SSI when they get to that age. Thus I would bet if you polled the question of getting the money now for sure vs. making sure its there in 20 or 40 years, the numbers wouldn't be close.

The fact they'll see more money in their paychecks is all that counts...it doesn't matter where it comes from or what it's called.

[dkf]

8. For goodness sakes...social security taxes are Regressive taxes.

Whenever people complain that the poor don't pay Federal taxes, the left says that they do pay taxes...PAYROLL taxes.

Now Obama wants to give the middle class a break by reducing taxes on the first $109,000 earned and we still hate it. Poor guy can't win.

[Pholus]

12. Hear hear. Let the poor start a 401k if they want a retirement like the rest of us.

[Statistical]

16. It doesn't reduce funding by one cent.

The $120B not paid by workers (2% of FICA) is paid by general fund.

[WhiteTara]

30. companies get a huge tax break and average joe gets

the do wacka do. Lower SS payments in the end. What fuckers. Obama is a fucker. No wonder when ever you type his name, the dictionary always shows it as a misspelling.

[Statistical]

38. What planet is that happening?

Companies are getting no break.
2010 employer SS contribution rate - 6.2%
2011 employer SS contribution rate - 6.2%

Workers are getting a 2% break
2010 employer SS contribution rate - 6.2%
2011 employer SS contribution rate - 4.2%

There will be no change to SSA.

$120B (2% FICA) from workers paychecks -> SSA
vs
$120B from general fund (funded vis progressive income taxes) - > SSA

[Travis_0004]

45. Thank you, at least somebody gets it

THERE IS NO CORPORATE TAX BREAK. Only for individuals. I'm self employee, which means I have to pay the 'employee portion' and the 'employer' portion. I will see a 2% decrease, not a 4% decrease. Your employer will save nothing.

[WhiteTara]

48. if general fund is progressive,

what is workers paychecks? My God, stealing food from the left hand to feed the right hand.

I read a book called the Patpong Sisters about the whores of Thailand. Customers didn't like condoms which slowed the spread of aids; so the whores would go without to feed their families today. The choice, death by starvation or death by aids seems so false, because the outcome is always the same; early, unhappy death. I'm jaded and cynical about all of this. Maybe, I'm even wrong. I'll let myself be pleasantly surprised by the future.

[Statistical]

49. payroll taxes are highly regressive. income taxes are progressive.

one can argue they should be MORE progressive but they are a progressive system.

At first glance payroll taxes appear to be flat but they are actually regressive due to the cap.

someone making $1K = 6.2%
someone making $10K = 6.2%
someone making $100K = 6.2%

however payments are capped at 6% of $106K = $6,360

Thus someone making 1 million = 0.63%
someone making $10 million = 0.063%
someone making $100 million =0.0063%

The general fund is funded primarily via income taxes, and inheritence (death) taxes both are progressive. The rate paid increases with taxable income. Now it likely should be more progressive but there is no denying it is a progressive tax base.

Income taxes - progressive.
Payroll taxes - regressive.

[WhiteTara]

51. my point exactly. Thanks n/t

[glitch]

50. Intentionally co-mingling SS with the deficit.

To make the argument that cutting SS will decrease the deficit at a later date.

Right now SS IS NOT PART OF THE DEFICIT.

They realized their mistake when they got pushback to the Deficit Commission targeting SS and are rectifying that technicality.

Craven, Geithner's prints all over it.