Misconceptions about payroll tax deduction
Yesterday evening I was watching the news. I do not remember which channel due to my unique channel surfing capability. To my amazement I saw yet again the “Morons” in action.
Due to Congress voting to not extend the payroll tax reduction, (it is not a cut since it will come back some day), a local news station was interviewing patrons at a local grocery store to tell the story of how the return to the correct payroll tax will affect the average person on the street.
The reporter was reporting the details of a young retired woman, young because she did not seem to be old enough retire, who was shopping at the store. They detailed how her income was limited and she had to watch closely as to what she purchased to stay within her budget.
The news station was espousing how the average tax payer would spend $1,000 more in income taxes due to the blocking of the extension of the tax cut. This was later clarified that the average tax payer was assumed to have an income of $50,000 and pay two percent more in payroll taxes.
In this lady’s case she was asked if she could afford an increase in her income tax. And of course she responded that she could not afford an additional tax since she was retired and that she and her husband were living on a fixed Social Security income. . . Yes, she said Social Security income.
There is not a payroll tax on Social Security income. Therefore, she and the reporter and the news station either did not understand the true ramifications of the payroll tax increase, which by the way is returning it to its original level. Or the news reporter and news station turned a blind eye to her response and did not correct her response to keep the spin and hype of the news story.