The Quiet Tax Increase
No, this is not some existential riff on the old question, “If a tree falls in the forest…”, it’s a sincere question.
Because it really happened. Almost two years ago, as 2012 went into the history books, the tax holiday on payroll taxes offered up by the federal government in 2011 and 2012 ended, and payroll taxes for individuals increased 2 points (or 200 basis points in finance-speak) from 4.2% to 6.2%.
Wow. That’s a pretty big increase from the perspective of increase off the base – it’s almost 50% more. Granted, it’s only 2% of a person’s total pay, but it’s sizable, nonetheless. It’s also the largest Social Security tax increase in over 50 years, and furthermore, it all happened on the employee side of the fence, whereas previous increase were split between the employee and the employer.
And, as stated above, hardly anyone seems to have noticed the increase. The federal government increased taxes, it affected middle-class incomes the most, and there was no blood in the streets, no huge rallies, no conservative politicians on television saying (with a completely straight face) that the United States was sliding dangerously close to all-out socialism.
Nope, in fact, according to the calculations that this economist offers up (since this post was published), only around 9% of the public are aware that the Social Security payroll taxes they pay rose in 2013. That is staggering when you think about it, since there has been, and still is, so much vitriol around taxes vis-à-vis the political process. Telling people that they need to pay more taxes for anything, even something immensely worthwhile, it is said, is a political suicide mission. You should only do it if you’re not ever going to run for public again, declare the pundits and the message-shapers.
And yet, and yet, this big tax increase was met with a collective yawn by the public, and then it quickly disappeared under the waves of other, apparently more interesting media stimuli.
It’s a tax that very few people seem to really care about.
In closing, we want to remind you that Sareen and Associates wants to make sure you legally pay the least amount of taxes you can – we can’t do anything about what taxes are levied and what taxes are eliminated by various government entities, but we can promise you that we will do our best to mitigate your tax obligations no matter how the law changes.