So the social networks were abuzz this morning over the so-called fiscal cliff* deal — the most common refrain being, "OH NO! SOCIAL SECURITY JUST WENT UP FOR THE MIDDLE CLASS! THANKS, OBAMA!"
Well, I was ready to be as bummed out as anyone over that. I've long supported extending the income level for Social Security withholding, but apparently the agreed-upon increase is on the middle class.
But then I read the Associated Press article and figured it out.
WASHINGTON (AP) — While the tax package that Congress passed New Year's Day will protect 99 percent of Americans from an income tax increase, most of them will still end up paying more federal taxes in 2013. That's because the legislation did nothing to prevent a temporary reduction in the Social Security payroll tax from expiring. In 2012, that 2-percentage-point cut in the payroll tax was worth about $1,000 to a worker making $50,000 a year.
In other words, a short-term political move that was always kind of a bad idea has expired. And because taxes have reverted to their previous, system-sustaining levels, it's tantamount to an increase.
I'm all in favor of restructuring payroll taxes, which hurt the poor and middle class far worse than the rich. But this is not an increase so much as a correction following a period of artificially low Social Security withholdings.
Tax cuts are political maneuvers. In recent years especially, they've been thrown about with more regard to grabbing votes than how they affect the national revenue stream. So it's all too easy to enact a ridiculous cut that lasts a few years, and then call it an increase when it inevitably expires. People then think, "The fiends added to my tax bill!" It's like saying a loaf of bread costs more because your coupon expired. No it hasn't — the regular price tag didn't rise. You were lucky to have the coupon, but gimmicks can't last forever.
It could have been worse. The deal saved the Bush-era income tax cuts for everyone making $400,000 or less. Losing that would have amounted to much higher bills for many more people.
The deal is not likely to make anyone joyously happy. Taxes are so highly politicized now that we can barely have an adult conversation about them. Which is why all anyone seems to see from this deal is OMG SOCIAL SECURITY HIKE!!! Chill out. Do some reading.
(* - I say "so-called fiscal cliff" because just like the debate over the debt ceiling and partial-birth abortion before it, fiscal cliff mania is largely a political fabrication.)