The Grinch Who Stole Christmas 2009

There will be the Grinch who stole Christmas 2009. Let me explain.

Social Security taxes have a cap that rises every year. For 2008 the salary cap is $108,000. For wage earners that exceed the cap, later in the year their paychecks net roughly 5% more, just in time for Christmas shopping. There is a proposal to remove the cap and let the tax have no limit.

There are three ways to look at a tax savings in your paycheck;
Some plan for it in their budgets. Yes, people who make over $102,000/yr can and do live from paycheck to paycheck. If they had planned on the extra 5% towards the end of the year, they will be short.
Most people see it as a “bonus” for their hard work in achieving that salary level and go out and spend it. The retailers count on it.
The smallest group looks at it as a way to rebuild savings, or some other form of investing.

What would you do with a 5% after tax pay increase?

Now imagine that the 5% isn’t there. That’s a lot less Christmas spending; less investment and some people will fall short on their personal budget.

It gets worse. Businesses are required to match the FICA withholding. Businesses use that 5% to structure pay, bonuses and hire clerical help to make those high wage earners more productive. Take away the 5% savings from Businesses, and there is less to hire people, less profits to reinvest in the business, less for capital asset purchases and less dividends to share holders, many of which are on fixed incomes.

All of this will have a very negative impact on the economy and jobs.

We risk the economy to fund what? It’s not hard to find an answer for yourself. Search the internet and you’ll find several answers from providing benefits to illegal immigrants to using the funds for other than social security retirement benefit funding.

You decide if this is worth the risk to our country’s citizens and economy.