Monday, December 31, 2012
That is an IMMEDIATE 2% increase in taxes that will come out of your very next paycheck. That means that even if we somehow sign a new contract for a 4% increase tonight, you'd lose virtually all of it due to federal, state, and local taxes, plus the 2% you'd lose due to the payroll tax increase.
Of course, we are not going to sign a new contract tonight, so you will start losing money immediately. A NYC teacher making $75,000 a year will have to pay an additional $1500 in payroll taxes, effective tomorrow. In real dollars, you'd take home $62.50 less in every single paycheck, starting with the January 15th check. That's $125 a month. For families that have been struggling to make ends meet after years of stagnant wages, that increase is a personal fiscal cliff.
Why is the press not discussing this? I have no idea, other than it doesn't really care about the middle and working class. There is still a slight chance that some principled Democrats will object on these grounds, but don't bet on it.
The 2% tax cut was put in place as economic stimulus several years ago because it was deemed the most effective way to get more money into the economy. Giving a tax break to working people generally means that we will spend it, basically because we have to. Economists pretty much agree that it works--and should be left alone. Here's a take on it from Forbes:
By raising payroll taxes, Washington is pushing ahead with an austerity measure likely to inflict the most economic damage while producing minimal savings for the Treasury. The payroll tax cut would have cost $86 billion in 2013, roughly 3% of expected federal revenue. It elimination threatens to diminish economic growth by roughly one-third.
Obama made two big promises to help himself get elected. He promised to let the Bush tax cuts expire for anyone making more than $250,000 a year, and he promised that taxes would not go up on the middle class.
He gave in (I'd say lied) on both. Tax rates will only go up on people making $450,000 a year, and the expiring payroll tax cut will guarantee that 125 million middle and working class families will see their taxes go up immediately. The vast majority of us make far less than $450,000 a year.
Rich people made out pretty well. Capital gains will rise only slightly, meaning hedge fund billionaires will continue to pay a smaller percentage of taxes than many wage earners.
So, teachers, it's time to write Mr. Mulgrew to insist that he get us that 4% raise that every other city union got. That way, Obama can snatch it from you and you'll break even.