Easy Street Investing

The truth about the payroll tax cut …

Nilus Mattive

I can’t believe how much airplay the expiration of the payroll tax cut is getting, and how utterly wrong the mainstream media’s focus is on the whole matter.

Newspapers and big websites are having a field day talking about how the “increased” payroll tax is hurting everyday Americans. Take this little excerpt from a Wall Street Journal article entitled “Payroll Tax Takes a New Bite” …

“Kari Barker, an accountant in Salt Lake City, recently received her first 2013 paycheck and realized that she and her husband will take home $250 less every month. The 32-year-old, who works as a financial controller for a medical-devices company, accepted a second job last week doing accounting work for a friend’s startup company.

“Ms. Barker recently had a second child, who joined the first in day care. She has been planning meals more carefully to spend less on groceries and has switched to less-expensive brands of household and baby items. ‘I used to be a diapers snob and would only buy Pampers or Huggies,’ Ms. Barker said. ‘Now I buy Target’s house brand, because it’s two-thirds the cost.'”

I’m sorry but this is hilarious stuff! And it demonstrates why both publications that should know better — as well as individual citizens who should know better — are absolutely clueless about what’s been happening with Social Security.

Let’s put aside the idea of someone being a “diaper snob,” which clearly indicates how ridiculous our consumer culture has become. I mean only in the U.S. would people complain about no longer being able to buy name-brand disposable diapers!

Instead, let’s focus on the fact that Ms. Barker is an ACCOUNTANT and the financial controller of a company.

Translation: It’s literally her job to understand things like payroll taxes. Yet this article makes it sound like she had no idea the payroll tax cut was a temporary measure.

Meanwhile, the entire piece seems to focus very little on just how damaging the initial cuts were to our nation’s retirement system!

Here’s how the Journal explains it:

“The payroll break wouldn’t have affected Social Security’s solvency, at least on paper, because Congress had promised to make up the lost revenue. But many liberal lawmakers had worried that the break could have added to the program’s long-term problems.”

That qualifier “at least on paper” is my favorite.

As I explain in my recently-released video — The Death of Social Security — it’s the very same one our lawmakers have been using over and over to explain away the fact that they’ve raided the Social Security trust fund.

Look, It’s Really Simple: The Payroll Tax Cut Was
Another Way Washington Robbed Our Retirements!

I’m all for tax cuts. But I do NOT like when politicians mislead the public about how these moves will actually impact our nation’s finances.

In the case of the payroll tax cut, lawmakers simply took more money out of the Social Security system and had us spend it.

Why? So Americans would think they got something for nothing. So stealing money from the future would make the present look just a bit better. And so that, ultimately, all of Washington’s career politicians would look better going into the 2012 elections.  

Never mind that the Social Security system was already running annual deficits! It’s the same old game of musical chairs.

Now the rate has reverted back to where it was in 2010 and everyone is squawking?

Well, how on earth do they think we’re going to get back the additional money that was spent over the last few years?

I’ll tell you how: With higher taxes in the future … as well as through benefit cuts, new means testing for wealthier Americans, and other draconian measures.

This is what Congress really means when they say they’ll “make up the lost revenue.”

How else COULD politicians make up the lost revenue? Are they all going to donate money from their own pockets? Of course not.

I realize this whole thing stinks as bad as an off-brand diaper. But the best thing you can do is get the facts now, and take protective steps as soon as possible. Because based on what I’m seeing and hearing, most Americans simply have no clue just how bad things are about to get when it comes to retirement issues.

Best wishes,



We want you to know that we take your questions and comments very seriously. In fact, they directly influence how we operate our Website. While we can't give specific tailored investment advice to you, we will do our best to address your inquiry through a personal response, in our regular issues or dedicated Q&A issues.

  • Mark

    I believe Dems embraced the “payroll tax cut” for two reasons:

    1. It was a way of making tax rates more progressive. Because FICA (not really a tax, but *insurance* premium) stops at incomes of $100k, reducing FICA is like cutting taxes for the middle class without doing the same for those at higher incomes.

    2. It made them sound like tax cutters, which is usually associated with Rs. It turned the tables on Rs.

    I think Rs were reluctantly supportive of it for two reasons:

    1. Anything to undermine and hasten the demise of Social Security is a step in the right direction for Rs.

    2. Reluctant because, with Ds supporting it as a step toward greater progressivity, it worked against R’s Maginot line: everyone pays the same percentage.

    I think this even put Rs in the perplexing position of defending Social Security solvency, as defenders against Democratic gluttony, paying for today’s lifestyle using tomorrow’s fiscal needs. If Rs could put a stick of dynamite under Soc. Sec. and destroy it, they would. But, for Ds to do it (and get the political benefit) turned the tables on Rs who had to flex their “fiscal conservative” muscle even if it meant saving what they’d like to destroy.

    Anyway: back to Nilus’s comment about ignorant population. I was talking to a cashier at the grocery store when all this “cliff” stuff was in the news. She talked about how our taxes would be raised. I explained to her what the “payroll tax” really is, how they defunded Social Security and now they’re just going back to how it was before 2009. She was dumbstruck. “That makes sense. That’s ok if they’re doing that. If they would just explain it like you just did.”

    I’m fairly liberal, but I really fault Dems for this. They tried to jump on the tax-cutting bandwagon, and perverted Social Security *insurance* into a “tax” and have further confused everyone’s understanding. It was complete opportunism, with little regard to how obfuscating public understanding could undermine Social Security.

  • Austin69

    I take great offense with jrj90620’s comment “If voters were honest, they would elect honest politicians.”

    I am honest, and with few exceptions, I am presented with a bunch of morons and/or self serving, greedy con men for which to vote. I think back to the Bush43 tax credit for dependent children – on the surface it seems a nice gesture, but it was, in fact, another sleazy politician’s successful ploy to purchase several million votes from the idiot electorate of this country. I raised my wife’s three children from elementary school to college inclusive without a per head tax credit as incentive, and I think any reasonable person would agree that having society as a whole contribute to the cost of raising my children is not only unnecessary, it borders on the asinine as regards sound national economics.

    I think Niles’ article is great because he delivers it just like it needs to be delivered – as a punch in the nose of every idiot who believes he/she is entitled to a free ride.

    The “diaper snob” must have gotten her accounting degree from the Bugville Institute for Transmission Repair and Restaurant Management.

  • jrj90620

    More nonsense.If voters were honest,they would elect honest politicians.Best would be for Social Security to just go away.Govt never manages anything efficiently.Let people take care of their own retirement.