We’ll all be paying more social security taxes next year!
No new legislation has been passed, and President Obama is actually trying to reduce the payroll tax to 3.1%. But there are other forces at play here that may result in about 10 million Americans paying more in social security tax.
The news is mixed: Those who receive Social Security benefits will receive 3.6% more next year due to a cost-of-living increase that will go into effect. Inflation has been rising, but the same inflation that affects the amount of social security checks also raises the amount of income that is subject to the Social Security tax, also known as the payroll tax.
Currently, workers pay tax on the first $106,800 of income. But starting in 2012, workers will have to pay the tax on the first $110,100, an increase of $3,300 that will be subject to the tax.
In the past, the 12.4% payroll tax was split between workers and employers, each of which paid 6.2%. For 2011 however, Congress passed a temporary payroll tax holiday which lowered the work portion down 2 percentage points to just 4.2%
There are a few scenarios for how much people could pay, all depending on what happens in the next 2 months.
Currently, people making $110,100 or more pay $4,486 to Social Security taxes.
If the Social Security tax reverts back to 6.2% in 2012, people making $110,100 or more would pay $6,826, a whopping $2,340 more than the previous year.
If the Social Security tax remains at 4.2% in 2012, they would pay $4,642 in Social Security tax, an increase of $139 in 2011.
If Obama has his way and the Social Security tax is lowered to 3.1%, they would pay $3,413 in Social Security tax, a decrease of $1,073.
Of course, this only affects people who make over $106,800. For those that make less than that, all of their wages are subject to the tax, so a decrease down to 3.1% would help everyone while reverting back to 6.2% would hurt everyone.
UPDATE: The 2012 social security tax rate is set, and remains at it’s 2011 level of 4.2%. Yay for more money!
Readers, are you rooting for the payroll tax to be lowered, raised, or stay the same? This is one of the most noticeable taxes we see and our tax bills are directly affected by inflation.
I did not see any mention of the amount the employer contributes to an individual social security account.
In 2010 the employee and the employer paid equal percentages of 6.2% on the Base Earning Wage amount of $106,800.
In 2011 the employee pays 4.2% and the employeer pays 6.2% on the Base Earning Wage amount of $106,800.
The forcasted 2012 year Social Security Website has published the the employee and the employer both will contribute 6.2% with an increase in the taxable Base Wage amount or $110,100.
Everyone should know the who picture.
Americans don’t save for retirement. The savings rate is a pathetic figure because we want to spend!
Social Security was already on a path to bankruptcy and our politicians made things worse with a revenue cut for the system. Now they are arguing we should CONTINUE to gut Social Security because we need to buy new TVs and eat out more.
It’s sad what has happened to this country.
flat tax! flat tax ! flat tax! flat tax! enough said….
@jack, Im not sure if you mean gutting ss in terms of gutting the change purse that holds its funds or gutting the hands that are working to fill it, either way, i disagree.
my mother in law is 75 years old. shes been working since she was 14. if it werent for my husband i helping to pay her utilities, she wouldnt be able to eat. lowering her benefits would be awful.
on the other hand, we are barely able to afford our one child. we live within our means, one car, one tv, basic groceries, not even cable…but we are drastically struggling. increasing our taxes would kill us just the same. we barely make too much to get any assistance (a whooping $28 a week) so i dont want to hear any of that talk…
why dont we do what we really need to do? talk about those $600 toilet seats & lifetime payrolls for our government officals that are built into our nations budget…….
National Sales Tax/Consumption Tax. Everyone pays taxes. Everyone buys stuff so they will pay a tax. I have been a tax preparer for 40 years. The underground economy is alive and well and they pay no taxes. Also we don’t know what income is. We have so many loopholes. I think the U.S. protects everyone so we should all share in the tax burden. Flat Tax/Income Tax, are not fair
@Kenneth Nather, Does everyone really realize that the tax buck does not stop at our paycheck. We are allowed to spend our money says the government but here is what the minimum tax base is for each dollar we earn. Items not included are property taxes, inheritance taxes and all the fees and taxes associated with money used to generate income from savings, stocks and other investments that were already taxed. Get real we have already paid taxes on this money, and still have no rights on what we do with it. We live in a free country but will continually pay to drive on the roads, go fishing, hunting, state parks, entry and parking into public beaches. I’m sure there are many free rights that are not free at all and limit many from participanting. Stop the waste and run gov agencies like we run our budgets at home.
12% government soda tax
17% payroll taxes
7% sales tax
18% gasoline tax
18% restaurant tip to pay for employees pay.
Alchole taxes
Tobacco taxes
What services does government agencies perform that would entitle them to tax these products and services excluding payroll taxes?
78% is taxed on $1.00 on the items listed and not inclusive. Where is our medical care, paid family leave and other services other countries give back to their citizens?If we invest our already taxed money the gov sticks their hands out again, because what’s ours is really theirs.
Senior citizens have it even worse, the gov limits income to 24,000 before droppng you from Social Security Income. This income includes earned income and retirement pensions and investment income. So why is it mandated that we pay into a gov run retirement system that we may not be able to collect on? WHY DOES THIS GOV WANT US TO ALL BE POOR AMERICANS.