Today’s depressing arithmetic

Say you have an income of $96,000, under the payroll tax ceiling.  How much will the 2 percentage point payroll tax increase affect your paycheck?

Your gross monthly income is $8,000.  If your take-home is 65 percent of your gross, a standard assumption, then your take-home pay will be reduced by (0.02*8000)/(0.65*8000) = 0.031 or 3.1 percent.  The dollar reduction in monthly take-home is $160. 

Combine this with a health care premium increasing 6.3 percent (source) and the hit to take-home pay climbs to $200 or more.  Combine this with pay raises that approximately match the actual rate of inflation, and you have a situation where most people’s take home pay is dropping in purchasing power.

I can’t help but believe that when the first pay stubs of the new year arrive, that a considerable amount of belt tightening will ensure.

The 1 percent that runs the country is blissfully unaware of all this, and thinks there is no problem with stiffing the American people year after year.

Soak the working folks

What no one is talking about in the discussions of the nauseating fiscal cliff negotiations is that the payroll tax holiday, a full 2 percent of individual incomes below about $110,000, is being let expire.  For most households with two parents working, this will be a full 2 percent reduction in take home pay.  Since consumption tends to track disposable income with a correlation >99 percent—combined with some reflexive belt tightening—this tax increase for the majority of households will almost certainly result in a slowing of the economy.  Meanwhile, as the floor for tax increases on the rich will be raised to approximately half a million dollars, the change in rates will likely have little effect.  As a commenter at Daily Kos points out, incomes at that level are largely driven by profits and capital gains and are highly variable, so that the increased tax rate will not even be perceived, at least for a long time.

Happy New Year, everybody!

Social Security, just the facts

Via:  www.firedoglake.com   It is so difficult to get past the relentless propaganda.  Best line:

“Alan Simpson, the loud-mouthed, factually-challenged, -one who would reduce your future Social Security to a range of 9 to 15 K per year, calls people like me “Greedy Geezers”, then turns to you and tells you to resent me because I am going to receive something he wants to take away from you.”

You may have heard that Social Security is funded through about 2030.  The plutocrats and their henchmen, including Obama, desperately seek your neofeudalization.

Must watch:

Eight facts about Social Security

Via:  Economist’s View  It is so difficult to fight the hysteria emanating from the right and validated by Obama.  The disinformation is incredible.  It kills me when I hear that “half of Americans pay no federal tax,” as if the payroll tax wasn’t a federal tax, and a highly regressive one.  If flat taxes are so great, why don’t we start with the payroll tax? 

"Eight Facts about Social Security"

Ezra Klein on Social Security:

1) Over the next 75 years, Social Security’s shortfall is equal to about 0.7 percent of GDP. Source (PDF).

2) For the average 65-year-old retiring in 2010, Social Security replaced about 40 percent of working-age earnings. That “replacement rate” is scheduled to fall to 31 percent in the coming decades. Source.

3) Social Security’s replacement rate puts it 26th among 30 Organization for Economic Cooperation and Development nations for workers with average earnings. Source.

4) Without Social Security, 45 percent of seniors would be under the poverty line. With Social Security, 10 percent of seniors are under the poverty line. Source.

5) People can start receiving Social Security benefits at age 62. But the longer they wait, up until age 70, the larger their checks. Waiting to 66 means checks that are 33 percent larger. Waiting to 70 means checks that are 76 percent larger. But most people start claiming benefits at 62, and 95 percent start by 66. Source.

6) Raising the retirement age by one year amounts to roughly a 6.66 percent cut in benefits. Source.

7) In 1935, a white male at age 60 could expect to live to 75. Today, a white male at age 60 can expect to live to 80. Source.

8) In 1972, a 60-year-old male worker in the bottom half of the income distribution had a life expectancy of 78 years. Today, it’s around 80 years. Male workers in the top half of the income distribution, by contrast, have gone from 79 years to 85 years. Source.

Among his comments, my preferred solution:

Social Security’s 75-year shortfall is manageable. In fact, it’d be almost completely erased by applying the payroll tax to income over $106,000.Source (PDF).