Posted on 01/07/2010 8:05:03 AM PST by Paratrooper
Recently, retired military have received e-mail messages notifying them of a withholding tax increase. The email states:
NO ANNUAL COST OF LIVING ADJUSTMENT (COLA) WILL BE ADDED TO MILITARY RETIRED PAY IN 2010.
DUE TO RECENT LEGISLATION YOUR FEDERAL WITHHOLDING TAX HAS CHANGED.
After much investigating and several discussions with the IRS, it appears the Democrats have played a “cash-flow trick” on working Americans and are taking more out of American’s paychecks across the board–all the while touting the Making Work Pay tax credit. The trick, when looking at the new withholding tax tables for 2010 as compared to post-stimulus 2009, buries an increase in federal withholding taxes–for all income categories–basically giving the government an interest-free loan until current year taxes are filed next year. Some would blame the increase in withholding on the Making Work Pay tax credit being spread out over 12 months as compared to 2009, which was only over 9 months, but this would be impossible as some middle class wage categories carry an increase in the withholding tax of over $200 per pay period.
Unlike the middle class wage earners, who are going to see huge amounts taken out of their paychecks, unless they increase their exemptions on their W4 form, it’s an increase that most wouldn’t even notice–$10 or $20 in some cases. Here are some of the “highlights” of the new 2010 withholding tables:
1.) Congress has lowered the threshold to capture more wages that qualify to owe taxes–across the board. For example, in 2009 the withholding tax threshold began at weekly single wage levels of $138. In 2010, that same wage is lowered to $116. In short, instead of the taxable wage starting at $138, it is now down to $116–which changes the income threshold and taxes even poorer Americans.
For married couples, the change in the weekly base taxable wage changes from $303 in 2009 down to $264 in 2010. These lower wage thresholds can be seen throughout the new withholding charts for weekly, biweekly, semi-monthly, monthly, quarterly, semiannual, and annual, as well as daily and miscellaneous pay periods.
This across-the-board reduction in the initial wage threshold increases the number of wage earners who would have to pay taxes.
2.) Instead of seven (7) wage categories, there are now nine (9) wage categories. The new structure allows for direct taxation on the middle class with these wages broken out into smaller categories. The direct hit on the middle class withholding taxes can be seen on all of the new tables. Additionally, the IRS could not explain these changes.
Let’s look at the actual numbers for one category and compare them from 2009 to 2010: 2009 Biweekly, Single, Payroll Period, after subtracting withholding allowances
Not over $276: $0 in taxes Over $276 – $400: 10% payroll tax Over $400 – $1,392: $12.40 plus 15% of excess over $400 Over $1,392 – $2,559: $161.20 plus 25% of excess over $1,392 Over $2,559 – $6,677: $452.95 plus 28% of excess over $2,559 (Notice the large salary range) Over $6,677 – $14,423: $1,605.99 plus 33% of excess over $6,677 $14,423: pays $4,162.17 plus 35% of excess over $14,423
Let’s look at the new numbers for 2010 Biweekly, Single, Payroll Period, after subtracting withholding allowances
Not over $233: $0 in taxes Over $233 – $401: 10% payroll tax Over $401 – $1,387: $16.80 plus 15% of excess over $401 Over $1,387 – $2,604: $164.70 plus 25% of excess over $1,387 Over $2,604 – $3,248: $468.95 plus 27% of excess over $2,604 (Notice the large salary range is gone) Over $3,248 – $3,373: $642.83 plus 30% of excess over $3,248 (Notice the substantial increase and 30% tax rate on these wages) Over $3,373 – $6,688: $680.33 plus 28% of excess over $3,373 $14,450: pays $4,169.99 plus 35% of excess over $14,450
These patterns of additional withholding can be seen throughout the new charts for the 2010 tax year for single and married persons. It appears that everyone earning a paycheck is affected, not just retired military; social security payments will remain the same.
Why would the Democrats tinker with the withholding taxes and, ultimately, cause more stress on Americans and businesses? Why would the Democrats create more wage categories and deliberately target the middle class with a huge withholding increase and 30% tax rate? Are the Democrats trying to backfill the deficits they created in 2009? Because taxpayers will have overpaid the federal government payroll taxes, will they be eligible to get back this additional withholding money in a tax refund when filing in 2011? Do taxpayers in the hardest-hit wage categories even realize that their paychecks are going to be significantly lower, unless they make the necessary changes?
Maybe there is a good explanation for the increase in the withholding taxes from 2009 through 2010, but I remain skeptical, because inherently, Democrats do not have the capacity to reduce taxes and typically make up the revenue somehow.
Get your calculators out and you do the math. Go here for 2009; start on page 4. Go here for 2010; start on page 39.
And you should remember this and the fact that House and Senate Republicans united against the stimulus bill, which may have been the trigger to all of this. And Obama and Congress should remember this from December 21, 2009:
After years of irresponsibility, we are once again taking responsibility for every dollar we spend the same way families do. It’s true that what I’ve described today will not be enough to get us out of our fiscal mess by itself. We face a deficit that will take some tough decisions in the next year’s budget and in years to come to get under control. But these changes will save the American people billions of dollars. And they’ll help to put in place a government that’s more efficient and effective, that wastes less money on no-bid contracts, that’s cutting bureaucracy and harnessing technology, that’s more fiscally responsible and that better serve the American taxpayer.” ~President Obama
Responsibility. Really?
I have underpaid my withholding in the past and had to pay a quarterly supplement the next year, but I never underpaid by April 15, the due date. I got no penalties then and hope to have none for the future as long as I plan to pay up on April 15.
The NappyOne
Yes and no. You pretty much have to be in bad faith. I always mark “0” exemptions to prevent a nasty surprise in April (I generally still owe a bunch), but this year I marked the full number of dependants I can (8).
I will save up for 4/15.
I kinda want to starve the beast.
You’ve got the wrong date. As long as it will be a Constitutional Amendment, the tax payment due date should be set as 5 days before any general election.
You pay taxes twice yearly, once before “super Tuesday” and once before the general election.
Withholding is a scam that should have been terminated decades ago.
(It relies on the same general rule of thumb that many successful savers use, e.g., a split in periodic direct deposit payments to divert a portion of each paycheck to one’s savings account.)
Unfortunately, the GOP leadership is too busy participating in the scam to actually push for its repeal.
Stay under 10 unless you want to give the IRS reason to start sniffing around.
It may come to the point where we all do #1 (increase exemptions) but fail to do #2 (send in the payments) in order to “starve the beast” and refuse to support this insanity. It’s our only weapon outside of the ballot box and unfortunately we can only do our part in our own district/state with regard to voting and are at the mercy of morons in the rest of the country.
I seen mine today this is Real!!
This needs Bumped back to Top
Didn’t he also say (about 8 times or more) that there would be transparency in this government and we could all watch the “debate” on the health care thing on C-SPAN?
Oh, and that the bills would be on the internet for people to see?
And didn’t he also say that no decisions on the bills would be made for a full 5 days...?
Pffft. I LOATHE this man and this government. Absolutely!
It will be significant increase in my taxes with held
Congress has spent so much that they could take 100% of of all earnings and still not have enough to make a dent in the debt; and still they spend more and more every day. Collapse is inevitable.
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