Many of us get our paychecks, and really focus on the bottom line: how much money we take home. We accept that we will be taxed, and there are certain such expenses we can’t control.
One of these types of expenses is payroll tax. In the last 2 years, payroll taxes have been 4.2% for U.S. workers. However, as of January 1, 2013, these taxes have shot up to 6.2%. In effect, the average American worker has taken a 2% paycut.
From what I understand, this tax break for the last 2 years was supposed to be temporary. Or, at least that is how it was characterized. Nevertheless, I’m convinced that most people paid no attention to this, or to payroll taxes in general. My belief is that there have been a ton of people that have been surprised by this increase to 6.2%, to the point of frustration. For some, you just know there is anger.
I can certainly understand that it stinks to find out that you’ll be taking home less money on the same salary, even with no change in expenses, insurance, or anything else. Honestly, I haven’t been thinking about this possiblity, so when talk about it started to surface, I immediately did the math. Wow, I thought: that’s not exactly an insignificant amount of extra money that I’ll now be losing. It’s almost like a week’s worth of pay over the course of the year, roughly speaking. I’m sure there are folks out there for whom this might cause serious problems. After all, we’ve seen that a significant percentage of people can’t cover unexpected expenses.
But then, I realized that there is really nothing we can do about it. This isn’t the fault of anyone’s employer, nor is it our fault as individuals. It is what it is, and we have to deal with it. The bottom line is that things have changed a bit, and there is a 2% increase in taxes up to 6.2% on the first $113,700 in wages.
There are 2 other thoughts that come to mind:
- Instead of getting excessively frustrated by something like this, it’s good to be thankful to have a job in the first place. If someone is unemployed, they would gladly take your job along with the 2% reduction in pay
- This further reinforces the notion that we must save as much we can all the time. You never know what changes can come our way, whether it’s tax increases, bad health, accidents, or anything else. Best to focus on living within our means, where we try to make sure our income exceeds our expenses at a minimum, and hopefully grow the gap between inflow and outflow of money.
My Questions for You
What was your reaction when finding out this news?
Were you angry, did you take it stride, or was your reaction somewhere in between?
How do you handle preparing for the unexpected?