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PrincipalMember said:    What really happened was that there was a bonus given to people for the last 2 years and hopefully people enjoyed the bonus, thanked god for a good time and now we are back to normal instead of feeling that there is an increase in tax.

By that logic, we should enact a 10% additional tax increase now so they can lower it to 5% next year, and we'll all enjoy the bonus!

whodini said:   The average person will feel the $1k pinch. Those who voted for the wealthy to pay their fair share, got a piece of the action, too. And they don't like it one bit!

Right. Hopefully people will be more thoughtful and engaged next time the subject of tax policy comes up.

This tax increase has no effect on my spending at all.

althes said:   I have already cut back on my spending, and will do so ruthlessly throughout the year.
That extra 1k a yr I am loosing, has caused me to even more look into buying things on discounts and cut back on discretionary spending for myself and the kids.

You aren't loosing an extra $1/year. You've been gaining an extra $1k the past couple years. If that $1k bonus money was instrumental in your making ends meet, you have much more serious fundamental problems with your finances than an expiring tax reduction.

I got rid of my cleaning person. That was costing me $150/mo. The 2% is going to cost us about $300/mo, and wouldn't have been missed back when we were DINKs. Now that we have a baby and daycare expenses, it matters more. I suspect we were using the money exactly the way the government wanted us to - spending it with a small business.

Now that we are parents (and work full time), the cleaning person was a sanity saver as much as it was a luxury. So while in the past I used raises to increase my savings, I may decide to use this year's raise to fund a return of the cleaning person.

pachelbel9 said:   I got rid of my cleaning person. That was costing me $150/mo. The 2% is going to cost us about $300/mo, and wouldn't have been missed back when we were DINKs. Now that we have a baby and daycare expenses, it matters more. I suspect we were using the money exactly the way the government wanted us to - spending it with a small business.

Now that we are parents (and work full time), the cleaning person was a sanity saver as much as it was a luxury. So while in the past I used raises to increase my savings, I may decide to use this year's raise to fund a return of the cleaning person.

It's not 2% on all income.

ChumChurum said:   technolich said:   2013 will probably catch the economy in a vicious cycle.

Taxes go up.

People spend less.

People now have less income as sales drop and income drops as a direct result.

Taxes go up as a result of a lack of sales tax income resulting in the government finding other "revenue streams".

People spend even less.

I'm all for paying a fair share but when the government takes over 50% of your income after everything is said and done it doesn't promote the economy, it stifles consumer spending, and leads to less tax income for said government.

Personally the payroll tax won't affect much spending, the penalties for not having health care and the penalties for having too many employees means we won't grow as a company, but the payroll tax won't directly affect my spending.

That said I understand why me cutting back spending won't make things better and it will only affect the people I normally spend money with.


- 39.6% top tax rate,
- certain deductions get phased out after $250K. the rate of phaseout is 3%. thus, your effective federal tax rate is 1.03 * 39.6 = 40.8,
- medicare 1.5 ( * 2 for employer's side) = 3.00 %,
- obamacare extra 0.9%,
- states like NY or Cali, 8% marginal state tax,
- states like NY or Cali, 7-8% sales tax,
- if you have municipal tax, add that too.

although not at the margin, you pay 12.4% of the first $113K in social security tax. if you are making $250K, that's roughly 6.2%.

i think at the margin, tax is pushing close to 70% at the high end.


You gotta pay to play in the USA. Feel free to earn & spend you money elsewhere.

Adding sales tax is a fallacy: do you blow all income on consumer goods? (even that fraction already withheld in taxes??)

When you have 3 kids and live in a high cola, every penny counts.
We don't spend carelessly, but the kids need things and a house requires upkeep.
SO like most people in the world every penny counts.

ScrawneyWallet said:   PrincipalMember said:    What really happened was that there was a bonus given to people for the last 2 years and hopefully people enjoyed the bonus, thanked god for a good time and now we are back to normal instead of feeling that there is an increase in tax.

By that logic, we should enact a 10% additional tax increase now so they can lower it to 5% next year, and we'll all enjoy the bonus!


Unless you were living under a rock, the social security tax rate had been pretty fixed for several years. For the last 2-years they gave you break and it is back to the historical rate. May be time to crawl back under the rock - then you don't have to deal with real life issues of taxes and other things.

Now you could argue - why do we need taxes? So why do we need roads, bridges, airports etc. Actually you don't need them if you decide to permanently stay under a rock.

PrincipalMember said:   Unless you were living under a rock, the social security tax rate had been pretty fixed for several years. For the last 2-years they gave you break and it is back to the historical rate. May be time to crawl back under the rock - then you don't have to deal with real life issues of taxes and other things.

Now you could argue - why do we need taxes? So why do we need roads, bridges, airports etc. Actually you don't need them if you decide to permanently stay under a rock.

Very true. FICA was "on sale" for the past two years. Prior to that, we had "making work pay" tax credits for 2009-10. These tweaks are smart ways of getting money into people's hands, but most folks just don't get it.

If Junior got one thing right, it was dropping $400 Checks In The Mail to taxpayers. Everyone suddenly felt rich, and few complained when the checks didn't show up the following year. It's an idiotic way of managing tax adjustments, but it plays to the lowest common denominator of our society...

Our first paycheck of 2013 hit yesterday. Many at work were sad and depressed because many already live paycheck to paycheck. We pay more for our health insurance and getting $100 less per month because of the payroll tax hike. Morale is down quite a bit because we didn't get a raise that covers half of the losses.

Not a huge problem for me, though it's never great to have a decrease in take home. Switched from Verizon to T-Mobile prepaid (saving $45 a month) and decided to make a few more meals per month instead of eating out at lunchtime. $100 a month is easily covered with minor adjustments.

whodini said:   The average person will feel the $1k pinch. Those who voted for the wealthy to pay their fair share, got a piece of the action, too. And they don't like it one bit!

Right, but neither presidential candidate was hugely supportive of keeping the payroll tax cut going. House Republicans certainly weren't fighting for it in the fiscal cliff negotiations; if anything President Obama wanted it more than they did.

PrincipalMember said:   ScrawneyWallet said:   PrincipalMember said:    What really happened was that there was a bonus given to people for the last 2 years and hopefully people enjoyed the bonus, thanked god for a good time and now we are back to normal instead of feeling that there is an increase in tax.

By that logic, we should enact a 10% additional tax increase now so they can lower it to 5% next year, and we'll all enjoy the bonus!


Unless you were living under a rock, the social security tax rate had been pretty fixed for several years. For the last 2-years they gave you break and it is back to the historical rate. May be time to crawl back under the rock - then you don't have to deal with real life issues of taxes and other things.

Now you could argue - why do we need taxes? So why do we need roads, bridges, airports etc. Actually you don't need them if you decide to permanently stay under a rock.
People seem to want it all. They dont want to give back a temporary tax break. They don't want to give up on any benefits like social security entitlements. And they want the deficit to be cut, preferably by making someone else pay for it. Its just sad.

althes said:   When you have 3 kids and live in a high cola, every penny counts.
We don't spend carelessly, but the kids need things and a house requires upkeep.
SO like most people in the world every penny counts.


Except that penny sitting on the floor of a public restroom. I don't think that one should count. Has to be a dime or better in that situation.

HotSalami said:   If Junior got one thing right, it was dropping $400 Checks In The Mail to taxpayers. Everyone suddenly felt rich, and few complained when the checks didn't show up the following year. It's an idiotic way of managing tax adjustments, but it plays to the lowest common denominator of our society...

Agreed. The challenge is that year after year, 'temporary' tax breaks and subsidies are added for often good, short-term reasons, and politically, (apparently) it's extraordinarily hard to let them expire as intended...

At the time, I thought the "check" thing was a wasteful stunt... but with hindsight, it wasted a lot less time and resources than the current state of affairs.

No sure of OP is serious.

Not just he payroll tax, but overall changes in taxes is making me think about moving to Alaska. I already know some folk who have decided their state of residence because of the tax consequences.

http://www.dailyfinance.com/2010/04/13/5-most-tax-friendly-state...

I want to buy an iPad costing $500. I would have to pay almost $550 after sales tax. With 36-39% federal tax and 11% state income tax, I'd have to make around $1100 salary to buy that iPad. At $50/hr, that's 22 hours or half a weeks pay. Not even sure I've taken into account the payroll or other taxes. In Alaska, I'd be able to buy 6 iPads and more on the annual resident benefit alone.

Less charitable giving.

glahhg said:   ChumChurum said:   technolich said:   2013 will probably catch the economy in a vicious cycle.

Taxes go up.

People spend less.

People now have less income as sales drop and income drops as a direct result.

Taxes go up as a result of a lack of sales tax income resulting in the government finding other "revenue streams".

People spend even less.

I'm all for paying a fair share but when the government takes over 50% of your income after everything is said and done it doesn't promote the economy, it stifles consumer spending, and leads to less tax income for said government.

Personally the payroll tax won't affect much spending, the penalties for not having health care and the penalties for having too many employees means we won't grow as a company, but the payroll tax won't directly affect my spending.

That said I understand why me cutting back spending won't make things better and it will only affect the people I normally spend money with.


- 39.6% top tax rate,
- certain deductions get phased out after $250K. the rate of phaseout is 3%. thus, your effective federal tax rate is 1.03 * 39.6 = 40.8,
- medicare 1.5 ( * 2 for employer's side) = 3.00 %,
- obamacare extra 0.9%,
- states like NY or Cali, 8% marginal state tax,
- states like NY or Cali, 7-8% sales tax,
- if you have municipal tax, add that too.

although not at the margin, you pay 12.4% of the first $113K in social security tax. if you are making $250K, that's roughly 6.2%.

i think at the margin, tax is pushing close to 70% at the high end.


You gotta pay to play in the USA. Feel free to earn & spend you money elsewhere.

Adding sales tax is a fallacy: do you blow all income on consumer goods? (even that fraction already withheld in taxes??)


What OECD country could I move to and pay less taxes?

begunn said:   2% 401K matching contribution terminated in 2001.
No pay increases of any kind since 2003
5% pay cut in 2011
High deductible health insurance coverage increased to approx. $10,000 annually for family coverage 2012
Illinois state income tax increased 66% 2011
Illinois tolls increase 87% 2011
Food price rose 2.5% to 3.5% 2012
Interest on modest savings average <1%

Payroll tax increase?
Didn't feel a thing, I was numb already.


Welcome to the new America....the foundation is crumbling (middle class) and it's a matter of time before the building collapses.

As for my spending, I'm looking at cutting where I can. Might ask for a raise since it's been nearly 2 years. Tuition for my daughter is kicking my butt too and I know it's only going to go up from here...not to mention 20% TV increase, 17.8% water price increase, etc. Damn, this is depressing.

This is a big hit for me, I just relocated and my rent/utilities went up ~20%, the payroll tax hit is about half or more of the difference I'm paying. I've already cut back on eating out, and plan on making sandwiches (PB&J and the like) for work, when I do eat (skipping lunch and just eating bulk nuts/fruit now). I've also stopped buying any new books or e-books (trading online, going to used bookstores, I read at least a book a week). I've also cancelled our cable and I'm now relying on Amazon Prime and I'm watching Hulu/media websites for any shows. CA just raised my state income tax as well, so that's another hit. I was going to buy a second car but that is postponed. On the upside I'm eating healthier and taking the kids to the park more instead of sitting indoors. And I finally moved the phones to pre-paid, $45 unlimited text, calls and data with T-Mobile. I'm in the process of switching car insurance as well...all things I should have done awhile ago, but now with the move and higher taxes the incentive to act finally kicked things in gear, that and the move which gave me a chance to switch phone and internet providers.

Edit- I erred in my description: I crossed the boundary for CA tax brackets, and my tax rate jumped because of that, and the rate in CA is higher than the state I moved from...I'm not in the high-income level that was specially targeted by Jerry Brown...Not that there's anything wrong with being in it

macosx said:   Not just he payroll tax, but overall changes in taxes is making me think about moving to Alaska. I already know some folk who have decided their state of residence because of the tax consequences.

http://www.dailyfinance.com/2010/04/13/5-most-tax-friendly-state...

I want to buy an iPad costing $500. I would have to pay almost $550 after sales tax. With 36-39% federal tax and 11% state income tax, I'd have to make around $1100 salary to buy that iPad. At $50/hr, that's 22 hours or half a weeks pay. Not even sure I've taken into account the payroll or other taxes. In Alaska, I'd be able to buy 6 iPads and more on the annual resident benefit alone.

You are bad at math. $50/hr * 40 hours * 52 weeks = $104,000. That's a federal marginal tax rate of 25% or 28% depending on whether you are single or married. No state has an 11% rate on that level of income.

Over the last few months, I've been focused on reducing monthly expenditures across the board. We refinanced, saving about $150mo (if I don't choose to pay additional principle) and we contacted our cell phone provider about switching to a value plan despite not hitting our contract date yet which they were obliged to do given our long history with them - that saved us $50mo. That was $200 every month I could save/invest as I saw fit. Then there were the normal expenses we were trying to manage better (fewer/larger trips to grocery/Costco's to prevent impulse buys, fatwalleting necessities when the crop up, etc).

That $200mo is almost a wash due to the rollback increase, but since it was a rollback, I'm less peeved about it than an outright new increase. Now I'll just look for other ways to cut back/save/etc to offset other increases sure to come this year.

It was a temporary tax cut, I knew it was temporary and when I set up my 2013 budget back in 2011, I accounted for the decrease. Luckily, I've received two raises since the tax cut was first enacted, so I can continue to max out my 403(b) and I'm in the same place I was this time last year.

It wipes out my entire raise for this year.

Not exactly great. A promotion might be possible this year. Gotta hope it does sooner rather then later with this

Ananrefugee said:   This is a big hit for me, I just relocated and my rent/utilities went up ~20%, the payroll tax hit is about half or more of the difference I'm paying. I've already cut back on eating out, and plan on making sandwiches (PB&J and the like) for work, when I do eat (skipping lunch and just eating bulk nuts/fruit now). I've also stopped buying any new books or e-books (trading online, going to used bookstores, I read at least a book a week). I've also cancelled our cable and I'm now relying on Amazon Prime and I'm watching Hulu/media websites for any shows. CA just raised my state income tax as well, so that's another hit. I was going to buy a second car but that is postponed. On the upside I'm eating healthier and taking the kids to the park more instead of sitting indoors. And I finally moved the phones to pre-paid, $45 unlimited text, calls and data with T-Mobile. I'm in the process of switching car insurance as well...all things I should have done awhile ago, but now with the move and higher taxes the incentive to act finally kicked things in gear, that and the move which gave me a chance to switch phone and internet providers.

Wasn't the CA tax income rate hike only for the high earners? And you saying that you are a high earner and life has become tough? Stop complaining!

shahen said:   It was a temporary tax cut, I knew it was temporary and when I set up my 2013 budget back in 2011, I accounted for the decrease. Luckily, I've received two raises since the tax cut was first enacted, so I can continue to max out my 403(b) and I'm in the same place I was this time last year.
I am in the same boat. I considered the 2% cut a "temporary bonus" and did not spend more because of it. So as we are back to normal I just save 2k less unless I get a raise.(which I doubt would happen or would be much if it does happen in this economy) I will keep the same saving and spending plans. I'm actually glad the two sides could pass this deal and made most of the previous tax cuts permanent. IMO it's a bit misleading to call the it "tax increase" because it was temporary in nature from the beginning. The real tax cuts have actually been made permanent(for people who make < 250k). I do think it would be bad for the economy not because of the 2% but because news media making it a big deal.

bigdinkel said:   Our first paycheck of 2013 hit yesterday. Many at work were sad and depressed because many already live paycheck to paycheck. We pay more for our health insurance and getting $100 less per month because of the payroll tax hike. Morale is down quite a bit because we didn't get a raise that covers half of the losses.

Stop spreading this treacherous panic! The life is getting better. Remember the drop in unemployment?

People love the pres they've elected, they love all congs/sens they've elected, all bankers they've elected.

Like in N Korea - there are just temporary difficulties, a negligible cut in rations. But the Great Leader and the Loved Teacher day and night work as one to take care of things for the people.

And those who spend all their salary on ice cream will be shot (unless they die first from hypothermia)

Anyone with financial sense would have known the tax was going to expire and planned accordingly. If you make $50k/year, you miss out on $83/month, assuming no salary increase form last year.

This thread is just a thinly veiled political thread and adding no value to FW. We want to discuss financial strategies for making money, not complain about taxes. Maybe this thread should be moved to off topic?

I have also moved from att to tmobile cheaper plans and its teaching the oldest kid about expenses as she now has to pay for her phone, as she is tutoring as a part time job.

I prefer the payroll tax to subsidizing your tax burden due to your 3 kids.

althes said:   When you have 3 kids and live in a high cola, every penny counts.
We don't spend carelessly, but the kids need things and a house requires upkeep.
SO like most people in the world every penny counts.

I agree with the others. It sucks losing over $100 a month and I have cut that down in expenses to reflect it. Unfortunately, everything is rising so much and my pay increases don't even come close to matching it so its not easy to increase savings. I got a 1% raise last year and going to get nothing this year.

pachelbel9 said:   I got rid of my cleaning person.

Cry me a river.

I received a 3.8% raise this year so I'm still ahead.

It will affect me ZERO because I am EXEMPT. I am also exempt from FICA Social Security taxes. THANK GOD!

Bryanhoop said:   I received a 3.8% raise this year so I'm still ahead.

Good for you, why don't you share.

Im gonna apply for food stamps as with everything going up, cant afford to eat with student loan rent bills etc and now this crap. I dont understand how people can afford to have kids now adays.

I don't mind paying my fare share of taxes, but the gov't already has enough income coming in. They just don't know how to spend it efficiently. They will just waste this tax increase, also. I think this will ahve a negative effect on the economy because people will ahve less to spend.

suderduperloo00p said:   Im gonna apply for food stamps as with everything going up, cant afford to eat with student loan rent bills etc and now this crap. I dont understand how people can afford to have kids now adays.

You are supposed to be self sufficient and make smart responsible decisions. For example, if you are going to get a student loan, pick a field of study that will ensure the earnings is worth the investment in time and money. Rent a place that is within your means.

A $1 increase in gas prices has the same impact on someone who earns 50K a year and who uses 20 gallons of gas a week to commute, as the payroll tax. Yet, the majority of people who are upset about the 2% increase on the S.S. tax and how it will impact their "starbucks" spending could care less about government spending, that we are 16 trillion in debt and the fact the government has basically been operating without a budget for the last four years. And yes, this is a political rant that doesn't belong on fatwallet..But, it is the truth. I won't get into the discussion about how S.S. taxes are spent on pork and aide to foreign countries that don't exactly have our best interest in mind.



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