If you want to see one of the tax increases just agreed to by Congress and President Barack Obama, check out your pay stub.
Yep, for about three-quarters of America’s households, according to one national analysis, taxes will go up this year.
A large part of that is that the payroll tax withholding will go up.
The two-year “holiday” on part of Social Security’s payroll taxes was a stimulus measure, and one that was broadly popular. It cut workers taxes from 6.2 percent to 4.2 percent.
In the recent negotiations on Capitol Hill, there was relatively little discussion about renewing the stimulus holiday. Part of that was the feeling, appropriate in our view, that the nation needs to get its debts under control. Part of it was advocates for Social Security, who didn’t want payroll tax holidays to become a habit. Part of it was the bad publicity that “stimulus” got a few years back.
It’s hardly, though, an insignificant tax: It will cost the median working household in the country, those making close to $50,000 a year, about $1,000.
What this change underlines is that deficit reduction is not just an exercise in raising top rates of income tax on high-income families. If we are to pay for the promises of Social Security, and for Medicare — in a nation where the population of seniors will double around 2030 — the costs will have to be shared more widely than the politicians’ rhetoric about protecting the middle class suggests.
We note that Social Security remains a very good deal for the average family. Not only it is a commitment of federal checks in retirement, but it provides broader protections in cases of disability caused by injuries or serious illnesses.
Still, this was not a tax increase that got much attention in the political debate, but it will be noticed on check stubs.