2013 Paycheck Decreases by 2%

By the end of January 2013, people will have received at least one paycheck and realized that it has decreased by 2% without regard to any other changes to your pay for the year.  Many articles have referred to this as a tax increase in error.  This is not a tax increase or a new tax.

Two years ago, the tax you pay that goes to funding Social Security for you when you retire, was decreased by 2% from 7.65% to 5.65%.  This decrease was an attempt to encourage spending and to stabilize the economy when the fears of recession grew stronger.  This was intended to be a temporary decrease to keep the economy going.  Now that the two years is up, the temporary decrease has stopped and taxpayers are back to paying the same 7.65% they have paid for many years now.

Many believe that Social Security will be bankrupt in the near future and there is constant political talk of reducing Social Security benefits due to the lack of funding.  So why would we spur the economy today by reducing the taxes that have been set aside for Social Security?  That is a question you will have to ask your congressmen and women.  This was a practical method of putting money in the pocket of all employeed taxpayers quickly to serve the purpose of encouraging spending in our economy.

The method may have been quick and easy, but taxpayers did not likely notice the 2% increase as much as they are now noticing the 2% decrease since many employees have received no or minimal pay increases the last 2 years.   This increase helped keep you paycheck steady, but it still reduced funding to Social Security.

Can we expect no decreases in benefits when the obligations continue to increase and the funding is decreased?  Hmmmm….