CA payroll tax increases

[Tobra]

I am certain it varies by level of income, but the check I wrote for my office manager today was about 9% lower for 80 hours. This is state income tax and state disability insurance. I don't recall reading anywhere they were raising SDI from 1.1 to 1.2%, or that they were raising state income taxes. Not surprised it happened, but zero notice that I was aware of...

Have not gotten new book for fed with holding, but I presume it is going up too.

That is all

[Porsche-O-Phile]

The feds are doing something similar - we got an e-mail from HR about it after the New Year saying that there had been adjustments, a mandatory increase in tax withholding and a corresponding decrease in SS withholding (I believe the number of tiers of tax withholding changed also, I can dig it up)

Since I'm not a complete idiot and recognize that these sorts of things are never done arbitrarily and there's always an agenda behind them (that agenda usually involving taking someone's money), here's what I think is really going on:

The government's goal here is to end up with more of your money at the end of the day. They're selling this "shift" to the (gullible) public as a one-for-one swap (e.g. "we increase tax withholding by $100 but reduce your SS withholding by $100"). Sounds simple enough, right?

Well, not really.

Well, first off the extra money missing from most peoples' paychecks provides a very good opportunity for someone to say a year or two from now, "well, we need to raise taxes but since most people are already overpaying (backed up by some statistics about number/average sizes of refunds, etc.) they really won't miss it and they won't see their paychecks go down any".

Also, there's the obvious benefit of forcing you to give them a 0% interest loan on your money for 0-12 months.

The more devious aspect is that eventually we're going to face some sort of Social Security reform. In other words, we're going to need to cut benefits or raise the benefit age, or both. So does it really matter if SS withholding is reduced? They'll simply "pay for" that reduction by reducing the benefits a corresponding amount (more likely reducing benefits more than the corresponding amount...)

The end result is that (once again) working people get punished and non-working people get rewarded and the government takes more of your money and gives you less in return for it.

That's how I really see this playing out - it's simply a positioning move as part of an overall strategy. Ya gotta' think like a chess player...

As a side note, I think a lot of government employees are going to get double-screwed by this. Their tax withholding goes up like everyone else's but since a lot of them don't pay into SS (retirement & pension funds in lieu of SS) they don't get the "benefit" of having that withholding offset, so they actually WOULD see a reduction in their paychecks right away. In other words it's a pay cut - the governments they work for keep more of their pay and give it to themselves to mismanage. Can anyone here confirm this is actually what's happening?

I trust our government about as far as I can throw it nowadays - and believe me I'm getting to the point I'd really like to throw it - throw it in the dumpster and start over that is...

[wdfifteen]

Originally Posted by Porsche-O-Phile

The feds are doing something similar - we got an e-mail from HR about it after the New Year saying that there had been adjustments, a mandatory increase in tax withholding and a corresponding decrease in SS withholding (I believe the number of tiers of tax withholding changed also, I can dig it up)

Mandated by whom? I just had a discussion with my accountant about how much I would have withheld from my salary check. The government (in Ohio at least) doesn't mandate any exact amount to be withheld as long as the taxes due are paid on time.

[wdfifteen]

Originally Posted by Porsche-O-Phile

The more devious aspect is that eventually we're going to face some sort of Social Security reform. In other words, we're going to need to cut benefits or raise the benefit age, or both.

It makes sense to raise the retirement age. It should be raised to 70 for everyone who is now 40 or younger. People are living longer now than they were when the current retirement age was established. There should be "needs based" benefits starting at 65 for people who have worked a minimum number of years and are disabled.
Another needed SS reform is to stop paying disability benefits out of SS payroll taxes. That money should come from the general fund. It's not right to put support for the disabled on the backs of wage earners. The disabled should be supported by income taxes, not wage taxes.

[stogie25]

Originally Posted by wdfifteen

It makes sense to raise the retirement age. It should be raised to 70 for everyone who is now 40 or younger. People are living longer now than they were when the current retirement age was established. There should be "needs based" benefits starting at 65 for people who have worked a minimum number of years and are disabled.
Another needed SS reform is to stop paying disability benefits out of SS payroll taxes. That money should come from the general fund. It's not right to put support for the disabled on the backs of wage earners. The disabled should be supported by income taxes, not wage taxes.

Let me guess, you are 41.

[gr8fl4porsche]

From my accounting software company concerning Fed withholding

Federal Payroll Changes in 2011


01-05-2011 02:13 PM

As many of you are aware, the President signed into law the “Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010” (the Act) in late December. The legislation included changes to the Federal Income Tax tables as well as reducing the employee Social Security rate. The recent 2011 Sage Peachtree Payroll Solutions updates include updated payroll tax tables, tax rates, and payroll tax forms!


The revised 2011 Federal Income Tax tables reflect the extension of the Bush era tax cuts and the expiration of Making Work Pay Credits included in the American Recovery and Reinvestment Act of 2009. Due to the expiration of Making Work Pay Credits some employees will see an increase in the Federal Income Tax withholding.

Employee Social Security Rate
The Act includes a reduction in the employee portion of Social Security from 6.2% in 2010 to 4.2% 2011 payroll tax year. The employer portion of Social Security, or FICA, remains at 6.2%.



My typical employees received a $10 per week raise based on the Fed changes. MO state stayed the same.

[wdfifteen]

Originally Posted by stogie25

Let me guess, you are 41.

60

Taxpayers can't cover everything, including the luxury of a guaranteed income from the age of 65. We can't guarantee unrationed health care either. Some day we are going to have to face up to those facts and the sooner we do it the better for everyone. Unfortunately, things like Sarah Palin's fear mongering over "death panels" are reasons our country will likely go bankrupt before we solve this problem. When even the righties are scared of not getting enough from the government, we're doomed.

BTW I'm politically a liberal, but I'm also a realist.

[stogie25]

In the long run what you predict will certainly happen. I was just wondering if you were the most patriotic self sacrificing 39 year old I had ever ran across or not.

If the government would pay me back the 32 years of money they have stolen from me and would stop taking any more I would opt out of social security in a heartbeat.

[Esel Mann]

Originally Posted by wdfifteen

60

Taxpayers can't cover everything, including the luxury of a guaranteed income from the age of 65. We can't guarantee unrationed health care either. Some day we are going to have to face up to those facts and the sooner we do it the better for everyone. Unfortunately, things like Sarah Palin's fear mongering over "death panels" are reasons our country will likely go bankrupt before we solve this problem. When even the righties are scared of not getting enough from the government, we're doomed.

BTW I'm politically a liberal, but I'm also a realist.

Yeah but now you ruined my Saturday. Couldn't you re-edit your post and change that "40" to "41" so that I can then feel better?

Kidding aside, I agree, we need to do something and while that some ain't going to be pretty, putting it off will only make it worse.

BTW, I'm also in the realist club too, but from the libertarian chapter

[Langers]

Quote de Porsche-O-Phile

The more devious aspect is that eventually we're going to face some sort of Social Security reform. In other words, we're going to need to cut benefits or raise the benefit age, or both.

It makes sense to raise the retirement age. It should be raised to 70 for everyone who is now 40 or younger. People are living longer now than they were when the current retirement age was established. There should be "needs based" benefits starting at 65 for people who have worked a minimum number of years and are disabled.

Another needed SS reform is to stop paying disability benefits out of SS payroll taxes. That money should come from the general fund. It's not right to put support for the disabled on the backs of wage earners. The disabled should be supported by income taxes, not wage taxes.

Nice idea, but here at least employers basically dont hire anyone over the age of 55. Exactly what are you meant to do until "retirement age"?

[Esel Mann]

Originally Posted by Langers

Nice idea, but here at least employers basically dont hire anyone over the age of 55. Exactly what are you meant to do until "retirement age"?

Some possibilities:

-Walmart greeter
-Ballwasher
-Medical test subject
-Florist
-Politician
-Exercise instructor for those over 55 at the Geezer Y's
-3rd shift of anything

I'll stop here to let others chime in.

[wdfifteen]

Originally Posted by Langers

Nice idea, but here at least employers basically dont hire anyone over the age of 55. Exactly what are you meant to do until "retirement age"?

I really hate to sound like a teapartier here, because I'm just the opposite, but taxpayers shouldn't and can't guarantee you everything you want. I think "what do I do for work if I'm over 55 and healthy" falls outside the taxpayer's purview.

[wdfifteen]

Originally Posted by Esel Mann

Yeah but now you ruined my Saturday. Couldn't you re-edit your post and change that "40" to "41" so that I can then feel better?

Kidding aside, I agree, we need to do something and while that some ain't going to be pretty, putting it off will only make it worse.

BTW, I'm also in the realist club too, but from the libertarian chapter

Seriously, what would SS give you at age 65, $2000 a month - $24k a year? If you want to retire at 65 instead of 70 you'll need $24K a year for five years to make up the difference. You have 25 years to save $120,000 - $5000 a year. A libertarian ought to be able to do that.

[Hugh R]

When I "retire" in about 10 years, the gubmit will have taken about $365,000 out of me and my employer, (both are out of my income if you understand the term "market clearing price". It will take about 13 years just to pay me back what they had taken, without any interest at all. If I'd gotten 2% on my money "contributed" to SS each year in a pass book saving account, I'd have closer to a million that would be mine the day I retired that I could spend, will to my kids or anything else I chose to do with that money. The same applies to all of you to a greater or lesser extent.

[Esel Mann]

Originally Posted by wdfifteen

Seriously, what would SS give you at age 65, $2000 a month - $24k a year? If you want to retire at 65 instead of 70 you'll need $24K a year for five years to make up the difference. You have 25 years to save $120,000 - $5000 a year. A libertarian ought to be able to do that.

24K goes a long way to the Esel Mann Beer Fund! Then every time I drink a beer I could then always say "to the poor soul working and supporting the beer fund for 10 of us in the system, I salute you!"

But alas, reality has already set in. In fact the scenario you pose is likely the best case scenario. There is ever the possibility that in addition to raising the age, the government also tiers the system and reduces payment across an income/asset range to those which they deem better off or more fortunate. So in addition to the $$$ you mention, more needs to be saved to cover the full spectrum of possible outcomes.

[wdfifteen]

Originally Posted by Hugh R

When I "retire" in about 10 years, the gubmit will have taken about $365,000 out of me and my employer, (both are out of my income if you understand the term "market clearing price". It will take about 13 years just to pay me back what they had taken, without any interest at all. If I'd gotten 2% on my money "contributed" to SS each year in a pass book saving account, I'd have closer to a million that would be mine the day I retired that I could spend, will to my kids or anything else I chose to do with that money. The same applies to all of you to a greater or lesser extent.

The system has worked out pretty well for me. I haven't added up how much I've paid in (way less than $500k) or how much my parents paid in (not much - they never made much money), but if it weren't for our social safety net I would have spent about $10,000 a month for my parent's care for the last 4 years with no end in sight. That's before I've retired and started using it myself. Without SS and Medicare, I would have ripped through nearly half a million already and probably would bankrupt myself just taking care of my parents until they die. I would be left to work until I couldn't lift a finger and then die on the street somewhere. Flawed as it is, I think our system is better.

[Porsche-O-Phile]

It's not sustainable. You're justifying a completely unsustainable smoke-and-mirrors charade on the basis of "well hey - I got mine"?

I empathize with your situation but why exactly do poor people deserve $10k-a-month care? If you suspect you might ever need $10k-a-month care, I would suggest that's a powerful motivator to get offa' one's ass and go earn more money while you can, then sock it away somewhere in case you ever do.

The SS system is a joke to any intelligent person; IMHO it ought to be abolished in its entirety. It is literally bankrupting the United States just so the greediest generation in history (the Baby Boomers) can continue to carry their smugly arrogant lifestyle of entitlement right to their graves, all whilst sticking the next generation (several generations, actually) with the bill for a lifetime of privilege and excess that can't be justified or supported by the value of what they've created - not by a longshot.

If people don't think ahead to retirement, they deserve what they get. They can be a burden to their own families or whatever - I don't see why the rest of us should be subsidizing their own lack of foresight, misfortune or stupidity (or combination thereof). God knows we need more incentives in this country for people to start thinking on a time horizon that extends past their next paycheck - or the next quarterly earnings statement. Do you think we'd have half the problems we currently face (budget deficit, trade deficit, housing crisis, etc.) if people collectively were able to comprehend the significance of long-term obligations? Somehow I doubt it.

The biggest challenge of my generation will be figuring out ways to undo all the things the previous generation has screwed up beyond belief. SS being one of the prime examples. This challenge will likely extend the next two or three generations past mine as well. That's how selfish and self-absorbed the Baby Boomers have been and how big the hole is they've overspent us into. Tell us all how much you love your kids again and how you want the best for them? Oh, that makes it all better then, right? Talk is cheap.

[wdfifteen]

Originally Posted by Porsche-O-Phile

I
... why exactly do poor people deserve $10k-a-month care?

Wow. What a question. Just .... wow.

Just in the past 12 months my mother had a hip replaced and cancer surgery and the treatment that follows that. My father was been in the ER three times, the ICU for four days and then three more in the hospital. That used up over $120k before housing and daily care are added in. You suggest they should have been allowed to suffer and die because they're poor? Wow.

[Porsche-O-Phile]

It's brutal but it's how it happens in the rest of the world.

If you have a solution as to how we can offer expensive care to everyone (including the poor) in a sustainable way, I'm all ears. The operative word is "sustainable".

Here's the reality - life isn't fair, but we all get the same 24 hours in a day to try and make the most we can for ourselves. Some succeed, some fail, some don't even bother trying and some waste their time. It's not fair and not pretty and not "equal" in terms of the outcomes. The reality of the free market can be brutal at times, but at least it's honest and sustainable. And as I said above, if you've got a better alternative I'd love to hear about it.

Nobody likes to see anyone suffer but the reality is there simply aren't enough resources to give everyone what they'd like or even what they need. We can either implement a Marxist solution that would make EVERYONE poor and destitute (and ultimately would fail as a system anyway) or we can embrace capitalism as the only system that really works - along with its inherent brutality. At least with capitalism, SOME people get a shot to become wealthy and make inventions, discoveries and advance society in a way that ultimately benefits everyone, even the poor.

Let's see - $10k a month times how many people in this country of retirement age? A few million? Let's for sake of argument say ten million. That's $10k x $10m = $100B a MONTH. Or $1.2B a year just to take care of old people. Where you gonna' get the money for that if that's what you think we should allocate to taking care of them?

I can't wait to hear this answer... I'm waiting.

[jcommin]

Originally Posted by wdfifteen

Seriously, what would SS give you at age 65, $2000 a month - $24k a year? If you want to retire at 65 instead of 70 you'll need $24K a year for five years to make up the difference. You have 25 years to save $120,000 - $5000 a year. A libertarian ought to be able to do that.

In a recent AARP article the average person only draws $1,000/month from SS, that's $12K/yr.


Porsche: You have mentioned your position several times. So I'm trying yo understand: The wealthy, the 3%-5%, can afford medical care, can sustain retirement. The poor certainly can't. There are many in the middle (and it's shrinking) that live day to day. I think if you would ask that group if they like living like that, most would say no. They don't/can't save to provide for retirement. The rest of the world is very class structured. Where you are at is essentially where you stay. What are you suggesting?