Monday, October 01, 2012

Temporary FICA tax cut (for social security) will probably expire on Jan. 1, 2013; workers paychecks heavily affected

The New York Times is reporting that Congress is quite unlikely to extend the FICA payroll tax cuts after the start of 2013, regardless of the outcome of the 2012 general election.

The major story by Annie Lowrey is here

The “automatic tax increases” and “automatic budget cuts” would start on January 1, partly because Congress failed to agree on a more specific plan in November 2011, as required by part of the debt ceiling extension after the silly partisan standoff all summer long, resulting in a lowering of the US credit rating.

However, continuing the FICA tax cut makes little sense in a world where Social Security is getting into trouble because of demographics.  People would get the same benefits (annuity) as others after paying less FICA taxes (or “premiums”).  In the end, the result would be more drastic raising of eligibility ages or benefits cuts, or possibly means testing, even of current or near-term retirees. 

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