Workers’ taxes to increase despite 'fiscal cliff' deal
CHARLESTON, W.Va. - The vast majority of working West Virginians will pay hundreds of dollars more in taxes this year because federal lawmakers let a two-year payroll tax cut expire this week.
This increase comes despite rhetoric from Washington lawmakers, who said they were able to save the middle class from tax increases following a harried settlement of the so-called fiscal cliff.
Income taxes indeed would have gone up without congressional action. Those increases would have hit low-income workers, the middle class and parents.
But the implication that the middle class was spared ignores the higher payroll taxes that will now take money out of the pockets of tens of millions of working Americans.
The payroll tax rate went from a two-year reduced rate of 4.2 percent back to 6.2 percent, the rate it had been before 2011.
For a median income West Virginian making $43,000 a year, the higher taxes will cost about $850 a year, or roughly $30 per biweekly paycheck.
Lawmakers on both sides of the aisle justified the tax increases. They said the cuts were not helping to stimulate the economy as designed and also threatened to eventually harm Social Security. Payroll taxes help fund Social Security.
The taxes cost Social Security $200 billion in lost revenue, though the law enacting the temporary cuts said the government was to "replicate to the extent possible" the losses Social Security faced by taking money from the nation's general fund.
Some lawmakers saw a choice between one sacred cow and another: reducing taxes or weakening Social Security.
Sen. Joe Manchin, D-W.Va., has argued for more than a year that the payroll tax should be allowed to increase "for the sake of Social Security."
"That's something for the safety and for the long term of Social Security - had to be done," Manchin said Wednesday.
During a conference call, Manchin said "99 percent" of West Virginians had been spared higher taxes because of the fiscal cliff deal. But he was apparently not including the payroll tax hike, which affects basically everyone with a job.
Manchin said there was little effort by members of either party to keep the payroll taxes lower.
"It was already determined; everybody agreed it would go away," Manchin said, referring to the lower rate.
Sen. Jay Rockefeller, D-W.Va., said he would still like to see "an extension of the payroll tax cut, which I believe should have continued temporarily in a way that still protected Social Security.
"But, even without the payroll tax cut, the facts are very clear - this bill significantly benefits West Virginians, and the net total puts more money in West Virginians' pockets," Rockefeller said in a statement Wednesday evening referring to what would have happened had Congress not acted.
West Virginia's U.S. House Republicans had assessments similar to Manchin's.
Rep. Shelley Moore Capito, R-W.Va., said taxpayers should take "solace" that their higher payroll taxes are going to shore up Social Security.
"We need those dollars to go into Social Security," she said.
Rep. David McKinley, R-W.Va., said he did not think the payroll tax cut was stimulating the economy as it was intended to do.
"It didn't work and it was robbing Social Security, threatening the stability of that account," McKinley said.
A recently released "fact sheet" by Congress' Joint Economic Committee suggested some of the potentially dire effects on Social Security were not so clear. Sen. Bob Casey, D-Pa., chairs the House-Senate committee.
The joint committee, known as the JEC, said a report by Social Security's trustees found the tax cut actually had helped the Social Security Trust Fund.
"All reduced revenues are recovered though transfers from the Treasury General Fund," the joint committee said in early December. "Furthermore, the additional jobs generated by the payroll tax cut added to the Social Security Trust Fund's balance. The JEC estimates that the boost in employment driven by the payroll tax cut contributed at least $1 billion in additional Social Security tax withholding and payments."
But the Social Security trustees also cautioned lawmakers in a report of their own about keeping the lower tax rate in place.
"Lawmakers should carefully consider whether continued significant General Fund financing for Social Security could threaten to undermine long-standing public perceptions of the program as an earned benefit financed by workers according to contributory social insurance principles," the trustees wrote.