How the Republicans Tried to Kill the Payroll Tax Cut…and Why

With the election year approaching, both parties are going to tell you that they will fight for you, the average American. Both will claim that, in the waning days of 2011, they pushed to lower your taxes, to boost the economy, to save the middle class.

Here’s how it really went down.

As part of the Democrats’ stimulus bill in 2009, the Making Work Pay credit reduced taxes by 6.2 percent, up to $400, on earnings, phased out between $75,000 and $95,000. (The numbers were double for couples.) It expired at the end of 2010.

Instead of renewing the MWP credit, Republicans insisted on replacing it with a two-percentage-point cut in employees’ payroll taxes, which reduced the average tax cut for low-income taxpayers and quadrupled the average tax cut for high-income payers — even though the poor are far more likely to spend those tax cuts and stimulate the economy.

The payroll tax cut cost almost twice as much as the MWP credit, but it didn’t affect the Social Security trust fund because the Treasury filled the hole with general revenues. In other words, they borrowed and increased the deficit. Apparently, Republicans didn’t care as much about the budget deficit as they did about tax cuts for the rich.   Continue reading “How the Republicans Tried to Kill the Payroll Tax Cut…and Why”

Social Security Isn’t Lying to You. But Rick Perry Is.

In 1935, when Congress created Social Security, over half of American senior citizens lived in poverty. Today, less than 10 percent of the elderly live in poverty. According to economists Gary Engelhardt and Jonathan Gruber, a $1,000 increase in Social Security benefits reduces elderly poverty by 2 to 3 percentage points.

Americans need those checks now more than ever. Since the end of World War II, it’s never been harder to save for retirement. Jobs are disappearing. Wages are barely keeping up with inflation. Education and health care costs are soaring. Pension plans are becoming a thing of the past.

So it’s not hard to understand why 34 percent of Americans have nothing saved for retirement. Nor is it surprising that 54 percent of retirees say Social Security is a major source of their income — especially because 401(k) accounts only average $98,000, which amounts to $600 per month in retirement, well below the poverty line.

But Social Security is hardly a windfall.

The average retiree will earn $14,124 from the government this year. The poverty line is $10,830. Of the 30 industrialized nations, 24 are more generous to their retirees than the U.S.

And your leaders want to reduce Social Security benefits.   Continue reading “Social Security Isn’t Lying to You. But Rick Perry Is.”