Millions noticing paychecks lighter today, due to payroll tax hike
Published January 11, 2013
Gabriella Hoffman‚Äôs paycheck is a little lighter today, thanks to a payroll tax increase that is forcing millions of Americans to make the kind of tough budget cuts their representatives in Washington lawmakers seem unwilling to tackle.
Hoffman, a 21-year-old Virginian who works at a nonprofit, estimates her paycheck will be roughly $30 less this biweekly pay period, or about $780 annually, thanks to the end of a two-year cut on payroll taxes, which fund Social Security. The tax has risen back up to 6.2 percent from 4.2 percent, costing someone making $50,000 annually about $1,000 per year and a household with two high-paid workers up to $4,500.
‚ÄúAs a newly-graduated person, someone coming straight out of college, I don‚Äôt like the idea of having less money coming to me due to the selfish interests of people in Congress who don‚Äôt have any interest in reducing our financial problems,‚ÄĚ Hoffman told FoxNews.com. ‚ÄúThis is an impediment for future economic growth. It‚Äôs going to make it harder for young people like myself to get married, find a better job, you name it.‚ÄĚ
Hoffman admits the hike won‚Äôt completely alter her spending, but the University of California-San Diego graduate said she will definitely have it in mind when it comes to leisure activities and entertainment.
‚ÄúAlthough it‚Äôs a small quantity on a monthly basis, just having less money going into my paycheck will prevent me from doing things and force me to be more frugal,‚ÄĚ she said. ‚ÄúI‚Äôll be more cautious with my spending.‚ÄĚ
"It‚Äôs going to make it harder for young people like myself to get married, find a better job, you name it.‚ÄĚ - Gabriella Hoffman
The looming hit to Americans‚Äô paychecks has been a hot topic around water coolers nationwide, as well as online, where several forums have been created for taxpayers to commiserate with their lighter wallets. On Twitter, #WhyIsMyPaycheckLessThisWeek has been a trending topic as most U.S. workers have either already seen less green or are preparing to do so.
‚ÄúWell, looks like we're starting to pay back all of the money we've spent, without cutting back spending,‚ÄĚ one posting read.
Another user cited the need for the U.S. government to ‚Äúrefill the Social Security ‚Äėlockbox‚Äô‚ÄĚ before stealing from it again as the reason paychecks are smaller.
Other postings chose to politicize the end of the tax cut that was part of the fiscal pact passed by Congress last week.
‚ÄúSeems to me that anybody who is paid a check for working is considered ‚Äėthe rich‚Äô in Obama's world,‚ÄĚ Jeff Hobbs of Texas wrote Wednesday.
Another posting read: ‚ÄúHey Liberals, #YourPaycheckIsLowerThisWeek because you voted for the job KILLER, not the job SAVER!‚ÄĚ
So, what exactly does $40 mean? That‚Äôs what the White House asked Americans last year when President Obama signed the Middle Class Tax Relief and Job Creation Act of 2012, which extended the payroll tax cut and emergency jobless benefits through the end of the year and prevented the typical family earning $50,000 a year from losing roughly $40 from each paycheck.
‚Äú$40 is 10 gallons of heating oil when the temperatures in winter hover in the negative numbers for months,‚ÄĚ Pamela from Fairbanks, Alaska, posted on www.whitehouse.gov/40dollars.
‚ÄúForty dollars is a tank of gas, a nicer Sunday family meal instead of hot dogs, the ability to leave lights on instead of turning them off earlier in the evening,‚ÄĚ Rita from New Britain, Conn., wrote. ‚ÄúForty dollars is being able to go to the movies, or having a night out at an inexpensive restaurant, it's also paying co-pays for my meds that I need to live on.‚ÄĚ
Priscilla of Kailua, Hawaii, said $40 is the amount ‚Äúsometimes between paying the electric‚ÄĚ bill or not.
‚ÄúWe cannot pay more,‚ÄĚ she wrote. ‚ÄúWe do not have it.‚ÄĚ
Mark Zandi, chief economist at Moody‚Äôs Analytics, told The Associated Press that the higher Social Security tax will slow growth by 0.6 percentage point in 2013. But for the average American worker who earns $41,000 ‚Äď and will receive $32 less on every biweekly paycheck moving forward ‚Äď the change will not be an ‚Äúinsubstantial hit,‚ÄĚ analysts told FoxNews.com.
‚ÄúAnd I think a lot of people don‚Äôt even realize this is happening,‚ÄĚ said Michael Tanner, a senior fellow at Cato Institute, a Washington-based think tank. ‚ÄúThis kind of just slid by the wayside with all the talk of the fiscal cliff.‚ÄĚ
Simply put, less money ‚Äúdefinitely will be‚ÄĚ a shock for many Americans toiling in an uncertain economy, Tanner said, adding that many will restrict impulse purchases rather than alter long-term financial planning.
‚ÄúPeople will have less money in their pockets, so by definition, they‚Äôre going to have to make do with less,‚ÄĚ he said. ‚ÄúHow they change their behavior remains to be seen.‚ÄĚ
For Ryan Ellis, tax policy director at Americans for Tax Reform, the hike represents a chance for young Americans to take a hard look at Social Security as a whole.
‚ÄúMy hope is that people under the age of 40 will start asking serious questions as to why they‚Äôre paying more into a Social Security system that they are increasing unlikely to get the full benefit of,‚ÄĚ Ellis told FoxNews.com. ‚ÄúI hope everybody does. It‚Äôs not a Republican or Democrat thing.‚ÄĚ
Hoffman, meanwhile, said she already has all the answers she needs.
‚ÄúAny tax increase is not good for young people,‚ÄĚ she said. ‚ÄúWhat it does is diminish your hard work and you‚Äôre slapped on the wrist. This administration is punishing people who are making money. They don‚Äôt like the concept of free enterprise. They think these problems will be solved in Washington by taking away more of people‚Äôs incomes.‚ÄĚ