What am I missing with the payroll tax increase?

[Kathi OD]

Clearly I am not a math person because I don't understand at all. My dh's paystub did not change, not one penny more deducted from either state or federal taxes. However, his FICA deduction changed from $80 to $426 in ONE check. That is huge. If that keeps up twice per month, we are talking $700. Dh is very nonchalant about the whole thing so I'm sure he won't call his HR or finance dept. Someone else posted about the max FICA can collect but that meant nothing to me. His last paystub from 2012 showed the total as $6574 but his deduction had been $80 for the last 4 months of 2012. I'm confused if they start this very high and then cut it back as the year goes on?

I hate to tell you, but if he had $426 taken out of one pay and he gets paid twice a month, that's $852 per month...not $700.

 

[ilovemk76]

OP, you are not missing anything.

 

[DisneyATlast]

As someone who is minimally versed in these issues, another helpful poster (sorry, I don't remember who!) pointed out to me the 113K threshold. Assuming your DH's earnings hit that sometime last year, his FICA went down (not to nothing, as someone else stated - I still had a little bit taken out each check, but not the same amount as before the threshold). Now, it has gone back up and will stay there until the threshold is reached again. Last year was the first time that had ever happened to me, so yes, it shocked me when my first paycheck of the year was about $300 less than normal ($600 a month). Maybe this is the difference you are seeing?

And just because I can't resist putting in my 2 cents...Having been on both ends of the spectrums being discussed here (but far from "rich"), I think it is about perspective. I don't miss the 2% all that much, to be honest - yes, I sort of miss $600 a month (which is NOT only 2%, more like 6-7%) and I hope that no matter how much I ever make I always will. I want to appreciate every dollar I earn, spend, and save. But, I'm tightening the budget up and I don't know many people, regardless of if they make $20,000, $50,000, or $150,000 a year who wouldn't miss $200, $400, or $600 a month from their budgets (and I totally made those numbers up - they are not calculated from anywhere!). Even if it is simply discretionary spending money, it still requires a change in some habit that was formed while the cut was in effect.

I personally think people can vent or moan all they want - everyone had a 2% increase in the tax from where it was last year. I assume that if someone makes $180K, they are living a $180K lifestyle and their 2% makes a difference to them, just like mine does to me.

Of course people can moan all they want. Just don't be surprised when someone is wondering why. It'd be like someone complaining to a homeless person that their house is too small.

People probably shouldn't live so that a 2% difference in income is going to change their lifestyle anyway.

 

[ajh88]

Of course people can moan all they want. Just don't be surprised when someone is wondering why. It'd be like someone complaining to a homeless person that their house is too small.

People probably shouldn't live so that a 2% difference in income is going to change their lifestyle anyway.

People do a lot of things they probably shouldn't do. Somehow I don't believe that the ONLY people commenting on the impact of the increase are ones who earn a "high income" (which I don't) - but again, maybe that links to the other thread. I guess when my income was around $50K, it was easy for me to look at someone making $150K and think, man, I'd have it so easy if I made that much money and they must never worry about money. In reality, I now know that I don't worry about money in the same way that I used to (like, can I pay my bills?), but I do still worry about it (like, am I saving enough for my DD's education, for my retirement, etc?).

But I will fundamentally agree with you and the OP - I wouldn't assume that a 2% "increase" in taxes would really make a catastrophic difference in the day to day lifestyle of a family earning between $150K and $200K a year.

 

[preschoolmom]

Like they say though....rich people don't get rich by being generous.

Who says that?

 

[rsschneck]

Like they say though....rich people don't get rich by being generous.

Wow! Very offensive statement.

 

[snarlingcoyote]

I wish the government had never given us a tax break, to be honest. I keep hearing people grumble about it as though they had never paid payroll taxes at this rate in their entire lives. It was supposed to be a short-term thing to stimulate the economy. What part of that did people miss?

 

[DisneyATlast]

Who says that?

I've heard it several times throughout my life, but I remember specifically the first time I heard it was several years ago when I was working as a waitress and there were certain "rich" customers who were notorious lousy tippers.

We'd all complain about this one rich man in particular who would come in regularly, get great service, and leave $1. I mentioned this on another thread awhile back. It's definitely not always true, but in general we would all agree that it was the average Joe's and the dirty construction workers who were the best tippers. There was another man who would break out his "tip calculator" every time. Yes, tips are based on the amount of the bill, but most people don't take that so literally that they break out a calculator if they order a soda instead of a water. Maybe people who are living in a way that 2% makes a big difference do though.

 

[DisneyATlast]

Wow! Very offensive statement.

If it doesn't apply to you then I don't know how it would be offensive. Obviously not all or even most rich people are greedy, but if you are rich and greedy then I think it's a pretty fitting and funny saying.

 

[DisneyATlast]

Who says that?

After doing a quick Google search, I think it may have originated here. Not sure.

"Homer complains to Marge that everyone except the Simpson family are getting rich off the Internet, and he wants a piece of the action, despite knowing nothing about it. He launches his own dot-com company, Compu-Global-Hyper-Mega-Net, which is later bought out by Bill Gates and his goons. Unfortunately, Bill Gates' "buying out" procedure is having his goons destroy Homer's office and break all of his possessions, stating he "didn't get rich by writing a lot of cheques".

 

[zxrst]

$300 a month might not be that much but if you can put the money in a mutual fund like Fidelity index 500, which averages 9.5% return yearly since inception, you would have had $610K in 30 years! Even if you take a more modest return (6%), you would still come out with $310K.

The other problem with all these tax increase is that the cutoff brackets are not inflation-ajustable. A 60K job in 1992 would pay you 100K right now based on the inflation adjusted buying power. Majority of the middle class families would cross the top bracket in the next 20-30 years.

 

[rsschneck]

If it doesn't apply to you then I don't know how it would be offensive. Obviously not all or even most rich people are greedy, but if you are rich and greedy then I think it's a pretty fitting and funny saying.

I'm not a minority but racism offends me. I'm not gay but anti-gay comments offend me. People in glass houses should not throw stones. You are making a huge accusation about people that you don't know and that is offensive.

 

[DisneyATlast]

I don't really care if someone who is rich and greedy to the point that they feel they should be exempt from taxes is offended.

 

[diz4ever]

Are you surprised that people who make the most are the ones complaining?

And it's not only those that make the most are the ones complaining. A lot of people forgot that the 2% was temporary and that along with increased health costs hits everyone. You tend to make sweeping generalizations which is offensive whether its about "rich people" or any other portion of society.

 

[vacationer1954]

Tax brackets and other features of the tax code are indexed to the Consumer Price Index.

 

[bdcp]

Who says that?

I agree. Not true. Most wealthy people are very generous. Just because they're not giving to the poster you quoted doesn't mean they're not giving. I see it.

We are a two income household who is "losing" $300/month. DH hits the threshold every year. I do not. We live in a high cost of living area. Here's the example I give: If we lived in Omaha and make what we make, we'd be living like we were wealthy compared to our neighbors. We live in the DC area, so while we live well, we are not living like that. What we have took years to get to. We're 52 and 55. Of course, people forget age, education, work experience all figure into salaries. We haven' always made that much. In fact, I was a SAHM mom for 14 years living on a very tight budget.

Fortunately, with us both working, we have a cushion and while we see the $300 less/mo, we really don't feel it. Now, if we were living on DH's salary alone, the $200/mo that would be coming out of his salary would be noticed a lot more. We do our best to live on his salary and play/save mine.

 

[DawnM]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct?

People are reporting more than that and saying they are seeing $300-$800 taken out of their checks.

There is something wrong then if you are seeing more than that amount taken out.

My husband is an accountant. He is on a backpacking trip in the mountains at the moment without cell service or I would ask him about it.

But I am not quite understanding those of you reporting higher numbers than should be taken out. There is something not right.

 

[thedonduck]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct?

People are reporting more than that and saying they are seeing $300-$800 taken out of their checks.

There is something wrong then if you are seeing more than that amount taken out.

My husband is an accountant. He is on a backpacking trip in the mountains at the moment without cell service or I would ask him about it.

But I am not quite understanding those of you reporting higher numbers than should be taken out. There is something not right.

I think people are adding in cost of healthcare going up, etc. for the amount. Just my guess.

 

[Marionnette]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct?

People are reporting more than that and saying they are seeing $300-$800 taken out of their checks.

There is something wrong then if you are seeing more than that amount taken out.

My husband is an accountant. He is on a backpacking trip in the mountains at the moment without cell service or I would ask him about it.

But I am not quite understanding those of you reporting higher numbers than should be taken out. There is something not right.

For people who earn more than $113K annually, their SS tax will be at a rate of 6.2% until they reach a point where they have paid approx. $7K into the fund for the year. After that, their SS deductions go to 0% for the remainder of the year.

The Medicare payroll tax has no income cap. So that amount remains constant throughout the year. It only increases if the amount of the paycheck increase, such as when you work overtime or get a bonus.

 

[vacationer1954]

If the cap is $113,000, then the most people will pay is $188.33 per month more, correct? People are reporting more than that and saying they are seeing $300-$800 taken out of their checks.

This might be happening because people are comparing their first paycheck of this year to their last paycheck of last year when they hit the limit and therefore paid much lower SS tax as a result. If they would go back on more paycheck they'd see the mistake they made in the comparison.