Why I'm Okay With the End of the Payroll Tax Break - Live Like a Mensch
Welcome to Dollar Stretcher Community Sign in | Join | Help
in Search

Live Like a Mensch

Why I'm Okay With the End of the Payroll Tax Break


Please don't throw these at me. I'll explain.


One of the sort of unnoticed fiscal cliff tax changes was the end of a Social Security Payroll Tax Break.

Basically, for the last two years, we've all been paying 2% less in Social Security taxes than usual. The plan was put in place as a possible strategy for jump-starting the economy. The thinking went like this: we'll give everyone the equivalent of a 2% raise, and that will get people pumping more money into the economy (i.e., spending more).

Whether or not the break stimulated the economy, the end of the payroll tax cut means that everyone is going to feel like they got a pay cut of 2% this year. And it's just human nature for us to notice losing money more than we'd notice or appreciate getting more money. Not to mention the fact that many people have likely gotten used to the extra 2% padding in their paychecks, and will have a hard time adjusting downwards.

Even in our household, I'm holding my breath for J's first paycheck of 2013 to see what the damage will be, between the end of the tax break and the fact that we're putting more money away in our FSA.

Basically, I understand that ending this tax cut could potentially hurt a lot of families.

But, I'm still okay with it.

You see, this cut came from Social Security allocations, and we all know that Social Security is already a little rather shaky. It's not clear whether or not the payroll tax cut actually stimulated the economy, but it definitely hurt Social Security.

Of course, our lawmakers thought of that ahead of time. They wrote into the law the requirement that Congress pay back the deficit that the cut would create--an amount nearing $215 billion dollars. (Speaking of Dr. Evil). Since no taxes were raised or spending cut in order to make up that deficit, we've put the $215 billion on credit. Yikes!

Basically, we can't afford this payroll tax cut, so it needs to go. (You'll notice that neither side of the aisle was fighting to save it.)

However, I do wish we could have ended the cut differently. Giving us this break suddenly is all very good. Seeing extra cash in your paycheck all of a sudden is pretty awesome.

But taking it away suddenly is much harder. If I were queen of Congress (not that anyone would want that job), I would have reinstated the tax a percent or half a percent at a time over the past year. It would ease workers back into a smaller paycheck so that actions on a national level would be less likely to hurt finances on a household level.

So them's my thinks. Do I need to duck as tomatoes coming whizzing out of my computer screen?

Published Jan 09 2013, 04:30 PM by Emily Guy Birken
Filed under:



frugal_fun said:

Not from me you don't. ;)

It's pretty obvious to anyone living outside of the Beltway that we need to both raise taxes and lower spending to reduce the deficit and shore up the meaningful social programs. It's like our households supersized. You need to get a better job *and* stop spending so much if you've got a structural deficit.

Oh well. Totally agree that the payroll tax should have been eased back in. From a paperwork perspective, though, easing back to full taxes is more difficult to implement. Not that means much - it would have been far less painful.

And yeah, Jan's paycheck will be rather depressing. (I warned DH about it a couple of days ago.)

January 14, 2013 2:47 PM

rimonabantexcellence site title said:

Pingback from  rimonabantexcellence site title

May 22, 2013 8:54 AM

Leave a Comment:

You must be logged in to leave a comment. Log in here.

If you do not have a log in, please register here. It's easy and quick. All that is required is your email address and a sign-in name and password that you create. Your email address is kept private.

The Dollar Stretcher has a new community! Click here to check it out and create your new account.

Share this Post

This Blog


About Us    Privacy Policy    Writers' Guidelines     Sponsorship     Media    Contact Us

Powered by Community Server (Commercial Edition), by Telligent Systems