Friday, December 28, 2012
Meanwhile, out here in the real world
Further, most people did not notice when their taxes dropped a couple years ago and they're unlikely to notice when they go back up again. Why? Well, although the pundits keep obsessing about what's going to happen to households earning more than $50,000 or $75,000 or some other number that allows them to say "Taxes will go up by $2000/$3000/whatever," the sad truth is that median household income in the U.S. right now is right about $50,000. That means half the households in the country have incomes low enough that any change is not going to be dramatic. Someone making minimum wage while working a part-time job might not even notice if his or her check is a dollar or two less than it might have been a couple weeks earlier, especially if the hours that person works vary from week to week -- and for a depressingly large percentage of the workforce, the hours do vary.
I can remember a few years ago when there was a lot of hype about the Bush income tax cuts. I don't recall exactly what I was earning then, but when I did the math, it turned out the tax cut worked out to the equivalent of one soda from a vending machine per week. Yep, my Bush tax cut was about $52 annually. No doubt it was nice to have a few extra coins each week, but if I hadn't been paying attention or if I worked irregular hours I might not have ever noticed. Would I have noticed if my taxes had gone up instead of down? I have no clue. Maybe, but maybe not. I noticed the Bush income tax cut because I was paying attention; the change in FICA withholding slid right past me at the time, and it involved more money.
Personally, I'm hoping FICA does go back to its old rate. Cutting it in the name of stimulating the economy was a truly stupid thing to do. FICA funds Social Security; reducing contributions to Social Security made no sense. All it did was play into the hands of the right-wing crowd that wants to eliminate old age insurance. By reducing the amount of money going into the Social Security trust fund, the right wingers positioned themselves for ratcheting up their claims Social Security is going broke. . . but that's a subject for a different post.