I'm not especially happy about the return of the employee half of Social Security tax to 6.2% instead of the 4.2% level where it had been for about three years. It doesn't strike me as having been allowed to occur for any good reason. But let's be honest about its effects.
A comment I read on Facebook:
I NOW PAY 25.00 MORE PER WEEK OUT OF MY CK.. AND AS AN EMPLOYER, I NOW HAVE TO MATCH THIS TAX FROM ALL EMPLOYEES.. DAMN GOVERNMENT .. HOPE THEY USE IT TO GIVE THEM SELVES A RAISE....NOT!Sorry for the all-caps, but that's how it was posted. Let's unpack this a bit. The person who posted this has just given us his base salary information--if he now pays $25 more per week in SS tax, that must mean he makes $1,250 a week, or $65,000 a year. Not a huge salary, but not bad, either. That $25 means he probably doesn't get to take the missus out to Applebees each week. That's a problem for all of us, because when you multiply the effect of that across everybody who's affected, that's a significant hit to the economy. I don't blame him for being upset. Think of the poor uneaten riblets!
But the rest of it doesn't make any sense at all. If he's an employer--and he may well be--then he is used to paying the "other half" of SS tax. The SS tax is 12.4% of payroll and has been there since 1986. (It's capped, of course, at a salary of $113,000 for 2013.) The employee pays 6.2% and the employer pays 6.2%. If you're lucky enough to be self-employed, you get to pay both halves. But for 2011 and 2012, the employee share was reduced to 4.2%. The employer share was not reduced.
So, when this jackleg complains that he "now [has] to match this tax from all employees," he's just being an idiot. He never quit having to pay the full 6.2% employer share. So he doesn't "now" have to match the tax increase. His outlay is the same as before on a percentage basis.
Maybe I'm being unkind by calling him an idiot, but the all-caps doesn't do him any favors.
Anyway, the money that is raised by this tax increase? It goes into the Social Security Trust Fund. It's not spent on congressional raises. Since SS runs a surplus every year--and will for quite some time--the excess is invested. Because millions of future retirees will be counting on that money, it has to be invested somewhere safe. And it's placed in literally the safest investment in the world: Bonds issued by the United States Treasury, an investment so safe that we would have to amend the Constitution to allow for a legal default.