Your take home pay will be a bit less, thanks to the “Fiscal Cliff” bill that Congress passed at the first of the year.
The reason is that the reduction in Social Security taxes which Congress passed at the request of President Obama has expired. This reduction was part of the stimulus package used to keep the country from going into an economic free-fall after the housing crash and resultant lending crisis of 2008.
I’m certain that some of my Republican readers will chide me for saying this. According to them, when I criticize the Obama administration, I’m a statesman. When I criticize the Republicans, I’m a biased Democrat.
However, it is a plain fact that I never benefitted in my paycheck from any of the huge tax cuts that President Bush passed during his presidency. My take home pay did not go up. My taxes did not drop.
On the other hand, the tax cuts President Obama enacted raised my take home pay about $100/month.
I am not a subscriber to “trickle down” economics. The reason I am not is that the money doesn’t trickle down. Or if it does, it doesn’t trickle far enough to get down to me and any of the people I represent.
We’ll talk more about this later. For now, I want to draw your attention to an article from the Baptist Press which outlines some the effects that the “Fiscal Cliff” deal had on deductions for charitable giving. I’ve bolded the section which talks about social security to make it easier for you to find.
The article reads in part:
The ‘fiscal cliff’ bill & charitable givingPosted on Jan 8, 2013 | by Warren Peek/Southern Baptist Foundation
NASHVILLE (BP) — After weeks of political drama, the U.S. has averted or at least delayed the so-called “fiscal cliff.”The American Taxpayer Relief Act of 2012 has been signed into law by the president after passing both houses of Congress.
Don’t you love the names of these bills? Taxpayer “relief” means that about 77 percent of U.S. households will pay higher taxes according to Bloomberg, mostly because of the expiration of the payroll tax cut. While some provisions are still set to expire, several provisions have been made permanent.
Following is a brief summary of various provisions of the act that may impact charitable giving:
Income taxes
The 2012 ordinary income tax rates remain intact for most taxpayers. For individuals with incomes over $400,000 and joint filers over $450,000, the federal income tax rate increased from 35 percent to 39.6 percent. The dividend and capital gains rates also increased from 15 percent to 20 percent for those filers as well. For most other taxpayers, however, the capital gains rate remains at 15 percent.
Phase-out of itemized deductions and personal exemptions
For individuals earning above $250,000 and joint filers above $300,000, itemized deductions and personal exemptions are limited. Total itemized deductions are now reduced by 3 percent. This phase-out will be watched closely, as there is still pressure to cap or phase out all itemized deductions.
Payroll taxes
The reduction of the payroll tax in Social Security is now over. Social Security will now collect 2 percent more from our paychecks. An employee earning $113,700 (the maximum amount of earnings subject to the tax), will pay an additional $2,274 in payroll taxes this year. (Read more here.)
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