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Posts Tagged ‘super committee’

Social Security Payroll Tax Cut Could Save You Up to $2k

Monday, November 28th, 2011

Our national debt just passed $15 trillion – that is, $15,000,000,000,000. The Congressional Super Committee tasked with figuring out how to bring that number down was due to come to an agreement by Thanksgiving, but leading up to that deadline, it did not appear that the Super Committee had any answer. The Super Committee had been meeting since August in the wake of the near failure for Republicans and Democrats to reach a deal to pass the budget.

For the unemployed and those receiving Social Security benefits, the Super Committee faced two options: extending payroll tax cuts and unemployment benefits or letting these things expire. Many economists have been arguing for the extension of the tax cuts and unemployment benefits, but with those, the federal government would have to come up with another $160 billion, not an easy task given the budget crises nearly every government agency already faces.

The alternative is letting payroll tax cuts and unemployment benefits expire. The payroll tax cut funds Social Security benefits, so without that money coming in, the government has to fund Social Security benefits from other incoming money. The cuts give Americans an extra $1,000 to $2,000 a year, which goes a long way these days. The unemployment benefits have been providing people with about $300 a week.

The fear is that without these tax breaks and unemployment benefits, the lingering economy could grow even worse. Economists have found that most of the extra money goes back into the economy, as those facing tough times use the extra money in their communities, bolstering local business.

The payroll tax cut would reduce Social Security taxes on your wages from 6.2 percent to 3.1 percent. How big of an impact would that extra money have on your financial situation?

Troutman & Troutman, P.C. – Tulsa Social Security disability attorneys

Chained Consumer Price Index Means Lower Benefits

Wednesday, November 16th, 2011

We have mentioned how members of Congress may alter Social Security benefits based on possible changes the way the Social Security Administration (“SSA”) measures inflation. This proposal appears to be gaining momentum, as the bi-partisan Super Committee looking for ways to trim the deficit reportedly supports the inflation change. The problem for Social Security beneficiaries is that the change would result in higher taxes and lower benefits.

The debate about inflation adjustment centers on the Consumer Price Index (“CPI”). Currently the SSA and the rest of the federal government use the CPI for all urban consumers. The Super Committee is considering switching to the chained CPI. The chained CPI calculates a lower level of inflation, because, as the price as something goes up, this calculation assumes you will switch to something cheaper. In this way, you avoid the increase in costs, and, thus, inflation appears lower.

The resulting lower inflation will have two big impacts. First, the changes in tax brackets will be smaller from year to year, since inflation adjustments will be lower. As a result, more people will be paying higher taxes as they move up brackets when their salaries exceed the new, smaller inflation rate.

Second, Social Security cost of living adjustments will be lower. The modest cost of living increase Social Security beneficiaries receive periodically is a big boost to those who depend on Social Security benefits. With the chained CPI, however, cost of living adjustments will be lower.

Some Congress members have expressed concern that this switch to a chained CPI is a hidden ploy that will have big consequences. Have you been keeping up on proposed changes to Social Security and other federal programs? How would this change affect your living situation as a Social Security beneficiary?

Troutman & Troutman, P.C. – Tulsa Social Security disability attorneys

Debt Super Committee Takes Aim at Social Security Benefits

Wednesday, September 21st, 2011

Social Security disability benefits and other programs that the Social Security Administration (“SSA”) runs could see major changes in the next few months. These programs are one target of the so-called “super committee”,” the 12 member Congressional committee that President Obama tasked with coming up with ways to trim the federal budget over the next decade. Some sort of cuts or taxes is inevitable, given Obama’s comments that Democrats need to be flexible with Social Security.

One expert who tracks federal spending predicts that the committee will employ at least one of two ways to deal with the SSA’s financial problems – either increase the payroll tax that workers pay into the system, or cut the current level of benefits. Possible cuts include bumping up the retirement age for those receiving retirement benefits, or reducing the inflation adjustments that beneficiaries get from time to time. The super committee is bound to recommend changing something, since the Congressional Budget Office recently estimated that, for all of this year, Social Security payments will make up a fifth of the federal budget.

If it is any solace to beneficiaries, you can probably expect the change to be small and maybe something that the SSA gradually phases in. This is because of the political sensitivity of cutting Social Security benefits. By and large, Americans strongly favor benefits, so it is hard to conceive of politicians making any drastic, immediate changes.

Troutman & Troutman, P.C. – Tulsa SSI attorney