What am I missing with the payroll tax increase?

Discussion in 'Budget Board' started by Suz D, Jan 19, 2013.

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  1. Suz D

    Suz D DIS Veteran

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    Sorry, I posted this on another thread, when I really meant to start a new thread. :blush:

    Everyone has been talking about the payroll tax increase and how it will impact their budgets in the hundreds of $$ a month. Isn't the increase 2%? So if your payroll taxes increase by $300/month doesn't that mean that you are making $15,000/month or $180,000/yr? Is my "getting older brain" having a problem with the math or is $180,000/yr income a hardship?

    I'm not trying to be snarky, I honestly think my math is off because most people who are complaining about the increase are talking about several hundred $$ a month and I personally would find it easy to cut several hundred $$ a month if I was making $180,000/year.

    Or are people talking about something else?
     
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  3. comicguy

    comicguy DIS Veteran

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    I think often people are talking about dual income famlies:confused3

    2% from each person's check
     
  4. Cheshire Figment

    Cheshire Figment <font color=red><marquee behavior=alternate>Friend

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    Yes. I agree. I used the same example, but for $200/month or $120,000/year.

    And to expand on your point, the SS maximum is currently based on the first $113,700 of income per year, so people with incomes higher than that will not be affected over the loing term.
     
  5. allyphoe

    allyphoe DIS Veteran

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    Two percent for two people is still two percent. And yes, to get a $300 / month increase, whatever combination of paychecks that extra $300 is coming out of would work out to $180,000 a year.

    High cost of living area, maybe.
     
  6. Suz D

    Suz D DIS Veteran

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    But isn't 2% of the household income the same thing as 2% of each check? If one person works and makes $100,000 the witholding would increase by $2000/year (2% of 100,000). If two people work and both make $50,000 then the witholding would increase by $1000.00/person (2% of 50,000) or $2000/year. Again, please correct me if I'm wrong.

    Our income is reduced by $130.00/month. We're a one income family. We live frugally enough that although that's a chunk of change, we'll reduce the amount we save (which is unfortunate), but we don't have to change our lifestyle.
     
  7. Marionnette

    Marionnette <font color=deeppink>Wishing On A Star<br><font co

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    That would still be a combined income of $180K.
     
  8. Marionnette

    Marionnette <font color=deeppink>Wishing On A Star<br><font co

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    I'm just guessing here, but I think that many of the people who are saying that they are down $300 or more are looking at more than just changes due to the SS tax holiday coming to an end. I have a feeling that many of them have higher health insurance costs coming out of the pay in addition to the SS tax.
     
  9. DisneyATlast

    DisneyATlast Mouseketeer

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    Are you surprised that people who make the most are the ones complaining?
     
  10. jmac323

    jmac323 Mouseketeer

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    So my check was around $60 less than it normally is this time. Times that by 2 because I get paid twice a month and that's $120.

    My husband's check vary depending on what jobs he's doing, however we typically gross around the same amount every year so I figured his amount would be similar to mine making us minus $240 a month. That's a large chunk to be quite honest, even though we are dual income making around $150k a year.
     
  11. comicguy

    comicguy DIS Veteran

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    Yes you are right it is still a combined 180,000 butif it was one person check then only the first 115,00 or so is taxed w/ the 2%

    So if each spouse made what ever amount combined to 180,000 but neither one exceeded the 115,00 threshold then that amount of $ could be correct, I also did not take into consideration of higher cost of health care as well as slight tax bracket changes.

    So basicaaly I am saying is with all of the combonation of the above it is quite possible to attain the orginal figure.

    Hope I explaine that a bit clearer than mu original response, reading back over it now it seems as clear as mud lol:lmao:
     
  12. Judyat

    Judyat Mouseketeer

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    So all those individuals who make over 113,000 have nothing taken out once they reach that level. Another big plus for them.
     
  13. Suz D

    Suz D DIS Veteran

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    This could very well be the case.
     
  14. Suz D

    Suz D DIS Veteran

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    I am, and I guess that's why I thought I must be missing something.
     
  15. mikehn

    mikehn DIS Veteran

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    We cant help it if we are high income earners. Thats just how it worked out. We have the right to enjoy the money we earn just like anyone else
     
  16. cmwade77

    cmwade77 DIS Veteran

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    We lucked out and are making 20% more before taxes this year, so this still means an 18% increase for us.

    But 2% os not the end of the world. DW and I line on so cal and have been living off of about $44,000 a year before taxes.

    While it would have been annoying, we could have lived with the 2% decrease. So, I have a really hard time understanding how 2% of 180,000 would be a hardship, unless you had a family with something like 10 kids. Yes, if you are already living paycheck to paycheck, you might need to make a few cuts. But if you make $180k a year and are living paycheck to paycheck, you might need some budgeting help.

    My parents have three kids at home and live off of about $10,000 a year and still are able to put money into savings. We do of course help them where we can, but they do well without our help.

    Now, their house is modest, but paid in full, as are their cars. The house is well insulated, which keeps utilities down. Instead of cable, we share our Hulu plus with them and they have Netflix, etc. that they are able to watch.

    They have no landline, but are on our family plan as it is only about $5 extra per line.

    They do live in a Highly agricultural area and several of the farmers will bring excess
    Crops to the neighbors, including them. So, this helps a little. But overall, there is so little competition where they live that prices are high for everything and drives up the cost of living. So, my point is if they can do it, anyone can. We just might need to reexamine what is really a necessity vs. a want and which of our wants should have the highest priority.

    This is of course oversimplified as to how they do it, I am just using it as an example of why I don't understand how 2% of $180,000 can have that much of an impact.

    And yes those who make more money certainly have a right to enjoy it. I simply question budgets if 2% will make that much of a difference. Ideally, you should be saving at least 10%. So, if the 2% will hurt that much, cut back to saving 8%. This negates the 2% decrease.
     
  17. Halbleib1

    Halbleib1 DIS Veteran

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    Yes but I think the problem people have is when high income earners act as though they are going to be living in poverty because of a 2% increase. We are not high income earners and that 2% is not going to impact our standard of living. Some of those high income earners are acting as though they can not pay some of their bills so they will have to make cuts in order to do so. We will have less money to do what we want with but it was never meant to be perm. We were always told it was a temp thing. The first year of it my husband was unemployed so it did not effect us at all. After he got a job yes the extra money helped to build our savings back up but we did not change our lifestyles because of it.
     
  18. disney4us2002

    disney4us2002 Tagless by choice!!

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    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?
     
  19. DisneyATlast

    DisneyATlast Mouseketeer

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    As a previous poster already said, nobody has a problem with high income earners. Don't we all try to earn as much money as we can? That's not the issue at all...

    The issue (for me at least) is when "high income earners" whine and moan about paying their share while the rest of us accept it as a fact of life and move on.

    Like they say though....rich people don't get rich by being generous. :)
     
  20. ajh88

    ajh88 DIS Veteran

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    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.
     
  21. Claire&TheBoys

    Claire&TheBoys The Queen of the Castle!

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    FICA is Social Security tax + Medicare tax. For the last 2 years, SS was 4.2% of gross taxable (which is gross wages, less any payments for health insurance that are pre-tax, like most employer-sponsored health plans). Now, it is back to 6.2%. Medicare is 1.45% of taxable wages. But, if you make over a certain amount (for 2013, I think CF is right with the $113,700 figure), you don't pay SS tax on what is above that. So, if your husband makes more than $113,700, then yes, likely the last several paystubs of 2012, only 1.45% was being withheld for Medicare tax. Now that we're in a new year, the full amount of 6.2% + 1.45% is being withheld. When he hits the max again, his FICA deduction will drop again.


    Hope this makes sense!
     
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