Monday, December 31, 2012

Obama Seizes Raises for Teachers (and everyone else...)

Neither Republicans nor Democrats seem willing to do a damn thing about the payroll tax increase. Even as the "fiscal cliff" is avoided, your taxes will go up because the payroll tax (called FICA on your paystub) will rise from 4.2% of your gross income to 6.2%, effective tomorrow.

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.



4 comments:

Anonymous said...

Actually, a teacher on maximum salary need only be married to someone making just a bit more, for the couple to be making the $250,000 that would be have been affected by the tax cuts expiring, had it not been pushed up to the $450,000 they are now talking about.

We may not think of ourselves this way, but in truth, NYC teachers are among the highest paid workers in the city.

I do not think of myself as making anywhere near one-percenter territory, but it recently occurred to me that a married couple of two teachers on max are making more than $200,000. So, when you talk about Obama's going back on his promise to let the tax cuts expire for only those making more than $250,000, just realize that many of us are exactly the ones who would be affected. All it takes is for a teacher (on max) to be married to someone making just a bit more (most doctors, lawyers, and similar, for ex.).



Mr. Talk said...

Sorry, Anon, but that is just plain wrong. The proposed $250000 threshold was for taxable income, i.e., your income AFTER all deductions are taken. My wife and I (both teachers) are both at the max, and after deductions we make less than half the $250,000 threshold. Yet, because the payroll tax is on GROSS income, we will pay an additional $4000 in taxes.

In addition, the increased tax rate will only be applied to taxable income ABOVE the $450,000 level. For the first $450,000, the tax rate is the same as it was been since Bush cut taxes.

A teacher married to a doctor with taxable income of $450,000 will pay ZERO additional taxes, other than the same $4000 in payroll taxes that my wife and I will pay. Do you really think it's fair that we will be paying the same increase, even though we make about 1/4 the take home pay?

TeachmyclassMrMayor said...

Of course, they could have just raised the cap, instead of the rate. You know, since I never go a check without paying FICA, and people say like athletes, are done paying FICA after one check. And I have nothing against athletes making money. But think the head of Citigroup would miss his money if they raised the cap to $250,000 or $300,000 instead of upping the rate? Funny how that never comes up, by the right or the left(if the two sided even exist).

Anonymous said...

Anon we are not among the highest paid workers in the city when you consider the pension plans for other workers like police and sanitation.

And we are not among the highest paid teachers in the area either. Remember it takes 22 years with a Masters and 30 above to reach maximum. And with the new eval systems, many teachers will never reach it to retirement.

Obama has a way of breaking promises. This is just another sham.