FICA rollback means less money in workers’ pockets
Rollbacks on social security withholdings have expired, which means millions of Americans paying into the program will see their paychecks shrink by 2 percent.
Although President Barack Obama agreed to extend Bush-Era tax cuts in 2010, that two-year extension expired Jan. 1. The social security withholding – found on the “FICA” line of a worker’s pay stub – has returned to 6.2 percent, up from its previously reduced 4.2 percent.
This increase in social security withholdings means those earning Marshalltown’s median income of $44,970 will pay roughly an additional $900 in taxes throughout the year. And those earning more than $113,700 will pay more, nearly $1,400 more annually.
Jill Petermeier, Marshalltown human resources director, said media attention of the so-called fiscal cliff has done well to prepare city workers for the reduction in their pay. The city employs only one person who earns more than $113,700 and its median income is $48,457, according to data obtained from the human resources department.
Petermeier said she is unaware of any changes the increased withholding will cause.
Jay Merryman, an investment broker with Wells Fargo Investors, called the return to the 6.2 percent “creative accounting.” He said he is uncertain why the reduced percent was put in place to begin with.
“It just makes me sick to think we borrowed from our future retirements,” he said.
Merryman said he hasn’t noticed any major shifts in how people invest their money in the two years since former president Bush dialed back the FICA percent. That move was done to spur spending, not to encourage investment, he added.
If social security is to stay solvent, Merryman said, the government needs to address spending and the debt ceiling in addition to revenue issues like FICA.
“There is no free lunch,” he said.
Jeff Kane, of Johnston, said Americans need to do a better job holding their public officials accountable for spending. He said this situation has been building for some time, and the FICA withholding increase is only a temporary solution to a much larger problem.
“There needs to be a more proactive approach,” he said. “You are still not addressing the meat of the problem.”
The issue, Kane said, is that the government, unlike successful businesses, lacks a clear strategic plan for long-term spending. Overall, however, he said if the 2 percent increase in withholding is going to help people, he is OK with it.
Paul Gregoire, vice president of human resources at Fisher Controls, said his company is still in the process of talking with its payroll personal.
“It’s basically more of a communication thing with us,” he said.