Friday, December 28, 2012

Meanwhile, out here in the real world

I'm listening to the news this morning and once again (still, as usual) there's a lot of hot air being generated about the looming fiscal cliff and the horrible, horrible things that will happen if Federal Insurance Contributions Act (aka "payroll") taxes go back to the rates they used to be (6.2% instead of the current 4.2%). Now, I know there are some potential truly serious consequences if a budget deal isn't reached, most of which are completely unrelated to FICA, but I also know something that the inside-the-Beltway bloviating pundits and so-called experts won't acknowledge: most people either won't notice or don't care. Why won't they notice or care? I just spent a few days out in the real world out among people who do not spend their days wandering around the blogosphere. It was a good reminder that most people are not hard-core news junkies. The average person doesn't spend his or her days glued to Fox News, MSNBC, or CNN. They're not on the Internet obsessing over the latest posts on various political sites, and they're not reading multiple newspapers trying to glean the most recent bits of wisdom on current events. They may have a vague feeling Congress is busy being dysfunctional, but this isn't news. It doesn't touch them the way more immediate or local issues do, like whether or not it's going to snow enough to make it a good year for snowmobiling (tourist dollars) or if the price of gas will continue to drop.

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.


  1. I tell people the same thing. In the last forty-some years of tax raising and lowering there has never been a discernible difference in my paycheck because of it. The "fiscal cliff" is more like a fiscal curb.

  2. the sad truth is that median household income in the U.S. right now is right about $50,000.

    Hum, my yearly income is less than 12K, but I have learned how to be a damn good bum. And I don't use any government programs, other than one that helped me get rid of my teeth.

    I don't even bother with the food bank, my 973 a month is about twice what I need to get by on so I piss a lot of it away.

    Not that I view buying beer as pissing money away, I support others buying beer.


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