Payroll Tax Fiasco

The Senate has rejected Democrat and Republican plans for extending the Social Security payroll tax cut for another year, at the same time the partisan battle over a cornerstone of President Obama's jobs plan continued.


The Senate turned down the GOP package by 76-22 and minutes earlier, the Democratic package was derailed after senators voted 50-48 -- 10 votes short of the 60 needed for passage.


The payroll tax was cut to 4.2 percent for 2011, but will return to its normal 6.2 percent on Jan. 1.


The Democratic bill would have cut the tax an additional 1.1% to 3.1% for next year (and be on), paid for largely with an extra tax on millionaires.


The GOP proposal would have left the tax at 4.2 percent next year, financed mostly with federal workforce cuts.


What we must remember here is that the 2% cut in SS tax during this year, is, and has been, subject to federal income tax as it became “earned income”…. Your taxes had gone up and more of your money was diverted to the Federal coughers bank account. 

At 6.2% for earning $50,000/year, your contribution to help the disabled and seniors is $3100.


Federal income tax (marginal rate of 25% only) was $12,000/year


For 2011, the Payroll tax was cut by 2%, to 4.2%= a negative $1000/year paid to SSI


Your earned income now sits at $51,000


At 4.2% for earning $51,000/year, your contribution to help the disabled and seniors is NOW $2142.


2011 Federal income tax (marginal rate of 25% only) is now $12,750/year, an increase of $750 to the Treasury.


So while the Treasury added an additional $750 in new revenue per working taxpayer ($50K), the money that is suppose to go help the disabled and seniors gets cut by $958, never to be seen again. That's a tax shift of $1166


Now the Republican where willing to keep it at 4.2%, but with it, brooming some of the bloated Federal payroll to help cover the loss.


Democrats wanted to cut it another 1%, which is an additional $550 of earned income, Which means another $137 to the Treasury.


Do you see the pattern going here?
Democrats claim that Republicans are trying to throw seniors over the cliff by changing how the entitlements system works, so it can remain solvent. But what the Dems have done is to strip more money away from the entitlement system so they can put in their hands, the big spenders.

Wonder what FDR, who signed Social Security in to law, would have thought of today's Democrats?