Smart TaxesSmart Taxes

Tax-cut flap could cost you $1,000

The White House turns to social media to make its case for the payroll tax extension. For a taxpayer making $50,000 a year, it means about $40 per 2-week pay period.

By Teresa Mears Dec 20, 2011 8:40PM

What will it mean to you if the Social Security payroll tax cut is not extended?

 

If you're an average taxpayer, making $50,000 a year, you'll pay an extra $1,000 in Social Security tax next year. That's about $20 a week, or about $40 a pay period for those who get paid every other week.

 

The White House took its campaign to Twitter, Facebook and YouTube on Tuesday afternoon, asking Americans to let Congress know what $40 means to them. The administration also is collecting Americans' stories online.

 

President Barack Obama noted that while most members of Congress support extending the payroll tax cut, Republicans in the House have chosen to hold it hostage so they can get other concessions from Democrats and the administration. "This is not a game," Obama said in response to a GOP characterization of the payroll tax debate as "high-stakes" poker.

 

"Our failure to do this could have effects not just on families but on the economy as a whole," Obama said of the tax cut extension. "It’s not a game for the average family, who doesn’t have an extra 1,000 bucks to lose. It’s not a game for somebody who’s out there looking for work right now, and might lose his house if unemployment insurance doesn’t come through. It’s not a game for the millions of Americans who will take a hit when the entire economy grows more slowly because these proposals aren’t extended."

(Post continues after video.)

What does $40 mean to Americans? Here are some of the stories collected so far:

  • "I can buy lunch from the cafeteria for almost a whole month for my twins, I can buy food, or pay for gas. I can save it for my daughter’s prescriptions deductibles. To some people $40 is nothing, but $40 is big money for us," writes L.A. of Hamden, Conn.
  • "After everything that comes out, including my mortgage, my take-home pay is $150 every two weeks. So minus $40 would be $110. I can barely get by now. That $40 bucks is my gas for my car to get to work. Taking $40 away from my pay would, just about put me under," writes R.T. of Charleston, W.Va.
  • "$40 less a paycheck means I will have to pick between my insulin and the water bill. It means never being able to see my doctor - even though I have insurance," writes B.T. of Roswell, N.M.

A number of respondents noted that $40 pays for a tank of gas, which equals transportation to work. Others mentioned needing the money for food or medical expenses.

 

Because Social Security tax is levied only on the first $106,800 of income, the tax cut has a greater impact on workers who make less than that amount. Because those workers are likely to spend that extra $20 a week on things such as food, gasoline and clothing, the money also goes back into the economy -- though there is some debate on how big a stimulus the tax cut provides.

 

"With the payroll tax cut, what is really at stake here is deciding whether or not to infuse $120 billion of disposable income into the economy in 2012," Andrew Fieldhouse, a federal budget policy analyst at the Economic Policy Institute, told ABC News. "It’s not the best way to create jobs, but it is the biggest jobs measure being considered by Congress."

 

The payroll tax cut expires Dec. 31, and Congress appears unlikely to act before then. Of course, it's certainly possible Congress could vote in January to extend the tax cut. The measure passed by the Senate was only a two-month extension, which means the issue would have to be revisited next year even if the House had voted to accept that extension. There's that little issue of how to pay for the tax cut still to be worked out.

 

More from MSN Money:

VIDEO ON MSN MONEY

212Comments
Dec 21, 2011 3:40PM
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Oh, but the Obamas shall enjoy their much needed holiday vacation in Hawaii at a cost to the taxpayers of 1.5 million.   I can't afford to drive to the local travel agency just to browse the brochures.  You're welcome. :)
Dec 21, 2011 1:26PM
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Cut the $4 Billion in ANNUAL aid to Israel and the $1.7 Billion in annual aid to Egypt and throw that in the SS coffers.

Dec 21, 2011 6:13PM
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It really sucks that this once great country has turned into such a joke financially. Benefits for people here ILLEGALLY that have no right to them, gov't funding of every global issue or conflict, feeding our enemies, policing the world, social security for people who have not paid into all their working lives like most of us have, over the top perks and pay for CEO's and athletes while the hard working "peons" support them, buying China's and third world goods without taxing them fairly while we build their economy and put our workers out of work and watching while our self serving government who we freakin elected schemes and squabbles and fattens their pockets while passing ignorant laws they don't have to follow and have a fool proof retirement plan. Did I miss anything?

 

Hundreds of years ago the greatest empire on earth, Rome, collapsed under internal corruption and passivism while integrating their empire with outsiders who didn't have the same respect, discipline and pride in their country that the earlier Romans had. I'm afraid that is where the United States is at the moment. It's just a matter of time folks unless people hold the government responsible and make them do what is best for the country. Basically that means reversing all of the above.

 

Sorry for the bad grammer and run on sentences b ut I hope my point was understood.

Dec 21, 2011 1:49PM
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Congress is robbing from social security once again!  This bill also includes a $15 a month tax on those buying a home, the $15 tax is for the term of the loan.  $180 a year that would not be returned to social security but put in the general fund.  The $15 monthly tax is not a 2 month tax, it is a lifetime tax, forever.
Dec 21, 2011 1:38PM
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The threat that it's costing 1,000/year for a person making 50K/year.... B.S. tell the real story.

 

Being that it's only a 2 month proposal, that's actually only $160 for a person making 50k/yr. This is so dumb, the dems are already quoting this as a "tax increase". Load of crap, quit robbing from the SS fund, idiots.

Dec 21, 2011 3:13PM
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When this went into effect last year, we didn't notice it.  Our health insurance went up that amount.  We didn't get any extra money in our pockets, it just balanced out not having to pay for the extra hike in health insurance.

Every time a cost of living allowance is given (haven't had one in 6 years now) health insurance, and assorted state taxes go up.  All these "raises" do is pay the top corporations etc.  Do we really see it?

50k a year=30k a year 20 years ago.  I don't notice a difference, still have the same house, same car, just paying more for everything else.

 

Dec 21, 2011 3:03PM
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50% make less then $33,000 dollars. So using that amount, This is how it brakes down

33k divided by 52 wk's = $634.62 The 2010 tax computation rate was .0765. Take 634.62 times that number and you get $48 55. In 2011 the congress, in order to get your vote, lowered that rate to .0565 Now, take that $634.62 times the .0565 and you get $35.86.

subtract $35.86 from the $48.55 and you get $12.69 That's the difference per week times 52 and you get $659.88 that everyone should've been paying anyway. The congress should never had played with the payroll tax computation to just get your vote and then turn it around and use it as what they would call an INCREASE IN taxes.

 

People, that is only $12.69 per week and if you think about what the gas prices are now versus last year, the government already got it back and now want you to vote for those guys in the Senate (Harrold role over spending Reid) that  proposed this 2 month extension. What a joke. That $12.69 per week couldn't even put a double Cheeseburger from burger King for two on the table for that week. (Double cheese burger at $1.49 times 2 = $2.98 times 7= $20.86. These are factual numbers  

Dec 21, 2011 1:44PM
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Smoke and mirrors folks; "We're really working to 'save the economy', 'help the poor American taxpayer' and 'save Social Security'. From whom? Who actually made the decisions that got us all into this gigantic boondoggle? It wasn't me. Was it you? Who are they kidding? They throw us a bone and expect us to wag our tails and think everything is going to be OK? I'm so sick of the mismanagement and expansion of government influence in our lives that I really am willing to vote them all out- including the representatives I like.

Whether I like everything he stands for or not, I at least believe that Ron Paul says what he means and means what he says. No BS. Vote them all out, vote RP in and let's see where this goes...

Dec 21, 2011 5:59PM
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Obama says he is tired of the GOP games.

 

I think Americans are tired of ALL their games.

 

VOTE THEM ALL OUT!!!!!

Dec 21, 2011 10:56AM
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Social Security wouldn't be in such bad shape if 1. it wasn't borrowed from, and 2. everyone contributed equally.  SS is squarely on the backs of the middle and lower "class".  If 100% of my pay is subject to payroll tax (I make less than $106k) , then 100% of everyone's pay should be subject to payroll tax.  $1000 doesn't make a hill of beans for those in congress so they have no skin in the game.  Tax 100% of their pay and I bet they would change their tune.
And while were making things fair, how about taxing capital gains as income? Don't give me that talk about how it would stifle investments, Entrepreneurs take the same financial risks but are taxed fully on what their business makes.
One more thing, I don't think that anyone should get a tax return greater than what they paid in.  That's wealth redistribution and its not fair.
My 2 cents...



Dec 21, 2011 5:44PM
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lower the damn gasoline buy a dollar then you can put the tax back where it was 6.2% and pay into social security, you people in washington are so freakin stupid. cheaper gas better living. groceries will be cheaper. anything to do with deliveries. but they don't want a easy fix, they want to be ****s about everything the American people want. cheap fuel. brings prices down on alot of stuff and jobs might even open up.
Dec 21, 2011 5:36PM
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Why are we Americans allowing our politcians to not do their job? Especially when you look at the poverty levels in this country. We are becoming a third world country very quickly and the inability of our government to act in a responsible manner will have many more people in trouble. All those who have jobs and think they are better than those that don't are in for a rude shock They are not immune to hunger and disease and will be the target of the people stealing and killing to survive. 

 

 If you or I did what the politicians are doing, we would be fired very quickly. Wake up America!

 

We need to fire these self absorbed creeps and VOTE THEM ALL OUT!!!!

Dec 21, 2011 3:33PM
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Just watched the first few minutes of that msnbc vid. Does anyone actually believe that load? I mean we all know that MSNBC is the DNC mouthpiece, but it's almost laughable.
Dec 21, 2011 3:58PM
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How can Obama and the democRATS stand up there and spew this dribble?  Everyone knows that a two month extension won't do anything to solve the problem.  We need real tax reform.  Obama says "lets not play Brinksmanshhip", how about listening to what you are saying. 
Dec 21, 2011 3:30PM
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I have mixed feelings relating to the payroll tax cut. The payroll tax that is being cut is your FICA, i.e., Social Security, contribution. This cut is a 16% reduction in Social Security contributions when the program is already underfunded and in danger of insolvency. Also, it does not decrease the employers FICA tax, so it has negligible impact on improving unemployment. However, it does give a much-needed tax break on the first $110,000 or so of earned income, so the tax break is appropriately targeted, namely people who work for a living.
Dec 21, 2011 5:39PM
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Why isn't that Sharpton not in jail for not paying his taxes???????

Oh That's right, he probably got bailed out by Jessy Jackson

Dec 21, 2011 6:34PM
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I operate several small business's and I do payroll.  My top employee makes $49,000 annual , his biweekly paycheck gross is around $1980.00 and yet after mandatory govt deductions he only receives $1520.00.  Almost 1/4th of his pay goes to the govt in some way or another. That would be a car payment, groceries etc.  the difference between making it ok and being in trouble.   Now they want even more.    I had free full coverage medical for all employee's until obamacare passed, now we have no medical coverage unless they choose to purchase it because the premiums escalated so high.  Seems like the more the govt talks about helping us, the more we get screwed.  While they seem to keep prospering.
Dec 21, 2011 11:23AM
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I'm sick of working Americans and the economy in general paying the price for the political games in DC.  It's all a political game to them, and it is definitely not a game to my family's bank account!
Dec 21, 2011 4:58PM
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I make less than $40000/year and I am not for sale to the Democrats for $40/month.  We can not afford to reduce the amount paid into social security.  It surprises me how many American can be bought off so cheaply.  obama said his first priority is jobs.  What happened with that?  His administration has increased government spending by 36% and increased the size of government by almost 15%.  He has gotten us further into debt faster than any other president in history.  He still thinks he can spend America out of debt at the cost of borrowing us into oblivion.  His policies have cost us our AAA economic rating.  He has spent trillions with the promise of jobs but there are no jobs and he says he needs to spend more to create those jobs.  Wake up America.  His only concern for the American people is the number of votes he can buy from us so he can spend 4 more years in the white house ruining America.
Dec 21, 2011 6:11PM
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I say instead of the lower and middle class pay for it; make the senators and members of the House pay for it. We can vote it in. Governed by the people for the people. I don't consider them people by any means.
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