Skip to main content

This morning, thousands of Americans took to Twitter to ask #WhyIsMyPaycheckLessThisWeek. It's now a trending topic.

There's an actual answer to this question of why paychecks are lighter today: the expiration of the payroll tax holidaythat went into effect on January 1, 2013.

Unfortunately, the majority of the tweets in question contain answers culled from the feverish imaginations of the most vitriolic Fox News anchors and radio shock jocks. Illegal immigrants are to blame. Obama voters. Welfare recipients. Women who want birth control. Over 500 (and counting) Twitter users blamed an expensive jacket Michelle Obama wore to meet the queen of England.

The expiration of the payroll tax holiday obviously has nothing to do with any of these things. It's a result of the horse-trading in Congress, the lack of attention to job-creating policies that help workers pay their bills, and devotion of Republicans and some Democrats to "cutting spending" while protecting the interests of their wealthy and corporate sponsors.

Here's why your paycheck is less this week:

The payroll tax holiday, which lowered your paycheck deduction to Social Security from 6.2 to 4.2 percent, was passed in 2010. As Matt Yglesias describes, the 2009 Recovery Act contained a similar measure that Republicans didn't want to extend "mostly because it was too closely identified with Obama."

On December 18, 2011, with the holiday set to expire at the end of the year, House Republicans revolted at the idea of extending the tax holiday for two months, even though the Senate had passed it in a bipartisan measure (89 voted "Aye").

A two-month extension was not ideal. It would've been a year-long extension – many, particularly President Obama wanted it - but Tea Party Republicans didn't want to pass it without equal offsets somewhere else.

Speaker Boehner initially caved to the Tea Party (shocking!) and rejected the two-month deal, leading a Senate aide to tell the Huffington Post "Boehner is not riding this tiger; the tiger is riding him."

Eventually on December 22, 2011 after public outcry, House Republicans caved and voted to extend the payroll tax cut, nine days after it was set to expire.  On February 18 2012, both the House and Senate voted to extend the holiday to the end of the year, without paying for it, which further angered the Tea Party faction.

But then at the end of this year: Fiscal cliff! Taxmageddon! The Bush tax cuts of 2001 and 2003, which had done zilch for 98 percent of Americans, were set to expire, along with several other policies. Republicans, for the most part, were intent on keeping those cuts for the richest 2 percent of Americans – otherwise, they'd be breaking their infamous pledge to Grover Norquist. President Obama, for his part, had just been reelected in a landslide, saying an infinite number of times he wanted those who earned $250,000 or more a year to pay more in taxes - voters wanted it! These election results convinced some Republicans a compromise was needed, but most stayed loyal to Norquist and other sponsors.

As you know, there were many offers and counter-offers between the White House and Speaker Boehner. The initial offer from Obama contained the payroll tax holiday extension, along with infrastructure funding, mass mortgage refinancing, an extension of unemployment benefits, and a host of business tax cuts called extenders. All stimulus measures, all stuff workers in this country desperately need.

The response from Republicans? Absolutely not. Why? Because the initial offer didn't extend the Bush tax cuts to the wealthiest 2 percent.

Through the next series of offers and counter-offers, the payroll tax holiday was dropped as a concession. Let me clarify – it was a concession from Obama to House Republicans, because of the desire not to raise taxes on the wealthiest 2 percent, and the desire to cut spending.

Put another way: That thing that made your paycheck bigger over the past two years is part of the "spending" that House Republicans kept talking about their desire to "cut."

(Also, this concession was predicted as early as September 2012, before we knew who would win the election.)

See this chart? The green part contains payroll tax holiday, part of "stimulus and tax extenders."

The final deal let the Bush tax cuts expire only for those making $400,000 and above. If you make between $250,000 and $400,000 a year, congratulations! You dodged a bullet, and by "bullet" I mean paying the tax rate you did under President Clinton. But as part of your bullet-dodging, and as part of the House Republicans’ slavish devotion to Grover Norquist's anti-tax pledge, and as part of the ridiculous process that lead to this last minute "fiscal cliff" deal in the first place, the payroll tax holiday was traded away and paychecks for every American who works for a living shrank this week.

And that's why your paycheck is less. Not Michelle Obama’s coat, not immigrants, not unions, and not stories about free "Obama phones" you read on the Internet.

That's the short answer, anyway.

by Doug Foote - Reposted from Working America's Main Street Blog

Originally posted to Working America on Fri Jan 04, 2013 at 11:35 AM PST.

Also republished by In Support of Labor and Unions.

EMAIL TO A FRIEND X
Your Email has been sent.
You must add at least one tag to this diary before publishing it.

Add keywords that describe this diary. Separate multiple keywords with commas.
Tagging tips - Search For Tags - Browse For Tags

?

More Tagging tips:

A tag is a way to search for this diary. If someone is searching for "Barack Obama," is this a diary they'd be trying to find?

Use a person's full name, without any title. Senator Obama may become President Obama, and Michelle Obama might run for office.

If your diary covers an election or elected official, use election tags, which are generally the state abbreviation followed by the office. CA-01 is the first district House seat. CA-Sen covers both senate races. NY-GOV covers the New York governor's race.

Tags do not compound: that is, "education reform" is a completely different tag from "education". A tag like "reform" alone is probably not meaningful.

Consider if one or more of these tags fits your diary: Civil Rights, Community, Congress, Culture, Economy, Education, Elections, Energy, Environment, Health Care, International, Labor, Law, Media, Meta, National Security, Science, Transportation, or White House. If your diary is specific to a state, consider adding the state (California, Texas, etc). Keep in mind, though, that there are many wonderful and important diaries that don't fit in any of these tags. Don't worry if yours doesn't.

You can add a private note to this diary when hotlisting it:
Are you sure you want to remove this diary from your hotlist?
Are you sure you want to remove your recommendation? You can only recommend a diary once, so you will not be able to re-recommend it afterwards.
Rescue this diary, and add a note:
Are you sure you want to remove this diary from Rescue?
Choose where to republish this diary. The diary will be added to the queue for that group. Publish it from the queue to make it appear.

You must be a member of a group to use this feature.

Add a quick update to your diary without changing the diary itself:
Are you sure you want to remove this diary?
(The diary will be removed from the site and returned to your drafts for further editing.)
(The diary will be removed.)
Are you sure you want to save these changes to the published diary?

Comment Preferences

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site