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D-Day: It's one thing when the wonks tell you to get ready for a tax hike that may or may not come. It's another when your employer tells you he's getting ready to cut your take-home pay and give it to the tax man.
That's what's happening right now, and those who still have jobs should take notice. If Congress fails to extend the Bush-era tax cuts due to expire Dec. 31, Americans at just about every income level will see their taxes rise — in some cases dramatically.
A story by Bloomberg News notes that it takes weeks for the IRS to prepare new withholding schedules. Normally, the tables are issued in mid-November to give employers time to prepare. But this year Congress left open the possibility it would do something about the expiring cuts, and employers have been left wondering what to do.
"I've been doing payroll for probably close to 30 years now, and never have we seen something like this where it gets that down to the wire," Dennis Danilewicz, the payroll manager at New York University's Langone Medical Center, told Bloomberg.
The Democrat-controlled Congress didn't address the issue before recessing for the midterm elections. So companies are preparing for the worst. A Bloomberg headline Wednesday said it all: "Employers in U.S. Start Bracing for Higher Tax Withholding."
The impact could be significant. Professor Michael Graetz of Columbia University recently estimated in the Wall Street Journal that letting the tax cuts expire will cost the U.S. economy $10 billion a month in added withholding from paychecks.
Goldman Sachs economist Alec Phillips estimates letting the Bush cuts expire could slash "nearly 10 percentage points" from disposable income growth in the first quarter of next year, and nearly two percentage points from GDP in the first half.
With GDP now at a tad above $14 trillion, the impact could be $280 billion or more in the first six months alone.
In short, the higher taxes could very well push us back into recession — at a time when the economy is struggling under 9.6% unemployment with little if any private-sector job growth.
What's most worrisome is what it will do to the working taxpayer. His or her take-home pay is about to fall, leaving noticeably less to spend and save.
A married couple without children and an annual income of $80,000 would have an added $221 taken from their paycheck every two weeks, the Bloomberg report says, quoting the H&R Block Tax Institute. That jumps to $558 for couples bringing in $240,000.
Mandates: The constant complaint is that health care costs too much. But a federal takeover of the system wasn't needed to trim expenses. Reasonable policy changes at the state level would cut costs significantly. Americans will spend $2.65 trillion on health care this year, or about 17% of ...
Media Bias: Does someone who calls a Senate candidate a "bitch" who is "going to hell" belong on national TV? If ABC doesn't fire Joy Behar, it will be sanctioning her violent rhetoric. What will be the next outrageous example of the establishment media's crass political favoritism? "The ...
Government: While it destroys jobs with its regulations, the EPA has an opening for an "environmental protection specialist" whose job it is to help the agency meet its "environmental justice goals." Meet its what? If socialism and environmentalism had a child, it would be called the ...
Here's a well-kept secret: Americans are in overwhelming agreement on social issues. Here's a not-so-well-kept secret. Many in the media and politics have absolutely no idea. We are told that in America today, partisanship has never been so bad, that it threatens our nation's unity. At the same ...
Election 2010: Pundits were wondering not long ago if capitalism could survive. Now it's the Obama agenda that's in intensive care. Voters rightly see the public sector's ambitions as a genuine threat. Whatever happens Tuesday, one thing is for sure: All that "hope" hype is totally yesterday. ...
Posted By: Auntie Lou(55) on 10/28/2010 | 1:25 AM ET
We are all so grateful for the $8.00 a week the feds let us keep of our money. We didn't realize how benevolent your previous tax breaks were. Now we don't know what to do with all the extra green paper. Soon we can use it to wipe our Obamas.
Posted By: Judith from Michigan(2925) on 10/28/2010 | 12:01 AM ET
Congressional Dems know full well the damage they have done & are continuing to do. They also know the carnage the tax hikes will cause. They aren't ignorant. But they do happen to believe in Socialism. The free-market capitalist system must be destroyed first. People must become dependant on the govt for everything, then those in power can usher in Socialism/Marxism/etc. Don't believe it? You haven't been paying attention.
Posted By: choppie(145) on 10/27/2010 | 10:34 PM ET
Well, America made history, we voted in a "person of color" to the White House. Now we are in a dam*ed if we do and dam*ed if we don't situation. If we pay off the "stimulus" debt now we suffer, if we don't our kids and grandkids suffer. The next bit of history will be to become a Chinese colony...
Posted By: Imprimis(305) on 10/27/2010 | 10:17 PM ET
CONgress voted itself automatic pay raises. Let their automatic pay raises revert to tax increases. They won't vote for that and will not vote for making permanent the Bush tax cuts. This is our representative government.
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