What do you think will be done about payroll taxes?

[neguy11]

I'm working dilligently at getting out of debt and bettering my financial life, but I budget my money very closely and made a "paycheck calculator" to estimate how much I'll receive each paycheck (I am hourly). I am really concerned about the payroll taxes. If I understand correctly, they will currently increase by 2% in January 1st. Well that's $800 less I'll have next year which would suck. I know the jobs bill cut it an additional 1.1%, but that was voted down.

Honestly I thought for sure they would extend or further the cuts (many Democrats support & Republicans are for lower taxes) but there seems to be opposition to this.

What do you think are the odds the payroll tax will increase on January 1st?

[bjl584]

I'm sure it will be extended. That's a political hot potato, especially with the current state of the economy.

[Like2Plan]

Originally Posted by neguy11

I'm working dilligently at getting out of debt and bettering my financial life, but I budget my money very closely and made a "paycheck calculator" to estimate how much I'll receive each paycheck (I am hourly). I am really concerned about the payroll taxes. If I understand correctly, they will currently increase by 2% in January 1st. Well that's $800 less I'll have next year which would suck. I know the jobs bill cut it an additional 1.1%, but that was voted down.

Honestly I thought for sure they would extend or further the cuts (many Democrats support & Republicans are for lower taxes) but there seems to be opposition to this.

What do you think are the odds the payroll tax will increase on January 1st?

The employee contribution for Social Security taxes should be 6.2%, but for 2011 it was cut back to 4.2. In 2012, the employee contribution will go back to what it was before (6.2%)unless congress makes a change. Some folks have questioned how they could be cutting SS taxes when they are worried about overall solvency of the SS system. The jobs bill did not pass in the senate, so President Obama now wants to submit parts of the bill separately to see if they can be passed.

[photo]

Originally Posted by Like2Plan

Some folks have questioned how they could be cutting SS taxes when they are worried about overall solvency of the SS system.

I don't know numbers, but a lot of people move into retirement with little or no savings and depend entirely on the government to provide for their existence. Perhaps the system needs to change.

The more the government provides, the less incentive for the average person to look after himself. Why keep feeding a monster machine that can't sustain itself?

[disneysteve]

Originally Posted by photo

I don't know numbers, but a lot of people move into retirement with little or no savings and depend entirely on the government to provide for their existence. Perhaps the system needs to change.

Clearly true. SS is a whole other discussion but is was never intended to be nor was it designed to serve as one's entire retirement income. It was meant to be one leg of a 3-legged stool with personal savings and company pension as the other two legs. Plus, when the retirement age was set at 65, the average lifespan was only about 63, so the expectation was that the average person wouldn't live long enough to ever collect benefits. Today, pensions are rare, people have forgotten how to save and the lifespan has grown by 18-20 years. It is an unsustainable system.

[JoshuaHeckathorn]

I think you can count on the payroll tax cut getting extended before the end of the year.

[MonkeyMama]

Government has a way of passing tax laws well past the last minute, so maybe we will know for sure next spring. IF we're lucky, maybe they will pass something around 12/31.

I think it's likely, but who knows. & I think the whole thing is ridiculous. These kind of tax cuts become impossible to reverse. People don't understand, and don't appreciate the tax break, but they will flip out when they resume back to normal, and be unable to pay their bills.

[artwest]

I think they will extend the tax cut.

It will be interesting to see what happens after the 2012 election. Hopefully some people with some sense will come into power and will fix the Social Security problem...as well as the many other financial problems this country in running in to.

[Snodog]

Republicans are balking because they favor tax cuts for the upper incomes instead of the middle and lower classes.

I think the pressure will be too much and they will cave and extend it rather than looking as if they are trying to tank the economy for political reasons.

[SeanH]

I don't think the cut will be extended, but I won't be surprised if it is. I do agree that its hard to take away anything that has been given.

The two hits I've read against the cut are - people who talk about job creation don't believe the cut should have been given on the employee side of the payroll tax. They believe it should have been on the employer side though they immediately qualify it by saying that companies aren't going to react to a $1000-2000 1 year tax cut.

Its also too easy to attack the cut as weakening social security's long term finances. People will say how can we talk about the weak outlook for the long term viability of social security and then promptly cut its funding.

[artwest]

"what social security problems should they fix exactly?.."

Social Security is going bankrupt. Cutting the taxes is kind of like a person being on the road to bankruptcy and they decide to work less hours, consequently bringing in less income.

If they keep the current Social Security system, they either need to raise taxes, cut benefits or do both.

[GREENBACK]

[quote=artwest;307083 they either need to raise taxes, cut benefits or do both.[/QUOTE]

Over the course of time and a few different administrations I believe this is what we'll get. It may be incremental enough that future generations will hardly ntoice it as they'll be used to mainly funding their own retirements.

[neguy11]

Well, right now it looks like my taxes will be going up by 2% come January 1.

Finally, FINALLY you have compromise in the Senate and now the House has to go mess everything up and claim some BS excuse about "short term fixes." You know this is not THEIR money, this is OUR MONEY that they are playing games with and I am fed up!

[Snodog]

^ I'm fed up too.

What the economy really needs is a full payroll tax holiday instead of a 2% measly cut, and we can't even get 2%. And by holiday I mean make it permanent until unemployment is under 5%. The treasury can deficit spend to make the SS payments so SS will not be underfunded. This whole idea of government debt being a burden to future generations is not only terribly misguided, it is completely false.

[maat55]

Originally Posted by Snodog

^ I'm fed up too.

What the economy really needs is a full payroll tax holiday instead of a 2% measly cut, and we can't even get 2%. And by holiday I mean make it permanent until unemployment is under 5%. The treasury can deficit spend to make the SS payments so SS will not be underfunded. This whole idea of government debt being a burden to future generations is not only terribly misguided, it is completely false.

So, why not just have the government print everyone a million bucks? That would end the recession would it not?

Unbelievable.

[Snodog]

Originally Posted by maat55

So, why not just have the government print everyone a million bucks? That would end the recession would it not?

Unbelievable.

You could and it would cure the unemployment problem -however(and I'm sure you will agree) that that much money would obviously cause massive inflation. You want to deficit spend the correct amount and too much would be disastrous. Right now with low inflation and 17% unemployment we are under spending and/or over taxing. Just my 2 cents.

[photo]

Originally Posted by Snodog

Right now with low inflation and 17% unemployment we are under spending and/or over taxing.

The US unemployment rate (from what I've read) is about half that.

[Snodog]

Originally Posted by photo

The US unemployment rate (from what I've read) is about half that.

I qouted the U-6 rate which also counts people who have given up looking for a job (but still want one) and people who want a full time job but have settled for part-time work.

[MonkeyMama]

Originally Posted by MonkeyMama

Government has a way of passing tax laws well past the last minute, so maybe we will know for sure next spring. IF we're lucky, maybe they will pass something around 12/31.

I think I Called it. 2 month extension passed today. Pushed it off to figure it out later. Not surprising in the least.

What a nightmare for business. I am a tax professional and was just reading all the details for if they don't end up extending for the rest of the year (on income tax return - there will be a balance due - for those who earn more than the social security taxable wage base - those who pay the max won't get any tax break unless they earn more later in the year and less early on in the year. Which is maybe fair and fine, but this is not readily apparent to the average joe AND creates more complexity in the tax code - like we don't have enough).

Not to mention we do a lot of payroll and this is going to create a ton of work on that side too.

Basically, this will cost lots of money for small businesses, the costs of which are generally passed on to employees and consumers. In addition, just creates a lot of uncertainty. Though if they pass it for the whole year in the end, guess it won't really matter. If they change it to something else later, will be a nightmare though. Lord knows why they can't come to any agreement in a reasonable amount of time. The IRS did not handle very last minute tax law changes last year, very well, and I doubt they are very equipped to handle a mid-year payroll tax change. Nor is the IRS or any payroll software company overly equipped to deal with 7 days notice on what the actual payroll tax rates will be for 2012. (& maybe those people would like to take Christmas Day off, and stuff like that). Yes, I have and will be writing e-mails to my representatives to tell them what I think about this.

[GREENBACK]

They're kicking it down the road. Should be a big political hot potato for the upcoming presidential election year.