As everyone already knows, we have avoided the fiscal cliff. However, what most people do not realize is that even though their income tax rates are staying the same, the payroll tax holiday has expired and was not renewed under the deal. In fact, this tax-hike on all working Americans is an increase of 2%. The holiday decreased the worker’s contribution per paycheck towards Social Security.
According to the Wall Street Journal’s tax calculator, a minimum wage ($7.80/hr.) earner’s payroll taxes will increase by around $300 next year or around $11 per paycheck if you are paid every two weeks.
While it is a step in the right direction asking the wealthiest among us to pay a little bit more so we can continue to provide a safety net, this tax hike on the working poor is a terrible move.
I understand that this was a temporary cut in contributions, but where were the fiscal conservatives demanding that any rise in taxes will hurt the economy? And where were the progressives who are looking out for the poorest among us? This terrible oversight is just another example of how the working poor are the forgotten demographic in this country. There are two groups with very different ideologies that should agree on this very basic principle.
The best way to keep an economy strong is provide an environment for demand. Demand will drive the supply. Middle out economics is the right way to take the country. Trickle-down economics has failed. However, we cannot forget about a very large constituency of people looking to move to the middle class. The working poor need our support, we will be a better country and a stronger economy because of it.