The tax man has his eyes on you. He always does. And if your wages exceed $118,500 then the tax man will collect.
Wages subject to Social Security jump 7.3% in 2017, to $127,200. That’s the largest single-year jump since 1983.
About 12 million will be affected. Are you one of them?
The Wall Street Journal reports Social Security Taxes to Rise for Higher-Income Americans.
Nearly 66 million people, or roughly 1 in 5 Americans, receive Social Security and Supplemental Security Income payments from the U.S. government. Based on subdued inflation over the past two years, their benefits will see a 0.3% cost-of-living increase for 2017 following no adjustment this year, the Social Security Administration said Tuesday.
The agency also said the maximum amount of earnings subject to the Social Security tax would climb 7.3% to $127,200 in 2017 from $118,500 in 2015 and 2016, affecting an estimated 12 million workers. The worker’s share of Social Security payroll tax is 6.2% of eligible wages; someone making at least $127,200 in 2017 would pay an additional $539 over the course of next year.
The jump in the taxable-earnings cap, the largest one-year increase since 1983, reflects rising wages and the fact that federal law kept the taxable maximum unchanged this year due to the absence of a cost-of-living increase.
The cost-of-living figure also plays a major part in determining premiums for Medicare Part B, which covers doctor visits and other types of outpatient care for elderly and disabled Americans.
While the final figure on the premium increase won’t be announced immediately—the Centers for Medicare and Medicaid Services last year released it in November—the 0.3% bump is likely to result in higher premiums for some 30% of Medicare beneficiaries. They include those who already pay higher premiums because of their higher incomes, those who receive Medicare but have deferred or aren’t eligible for Social Security benefits and those who are new to Medicare in 2017.
The reason is a provision of the Social Security Act called the hold-harmless provision. It prevents Medicare from passing along any premium increase greater than the dollar increase in Social Security payments to the estimated 70% of beneficiaries who will qualify for hold-harmless treatment in 2017. When the cost-of-living adjustment is low, it means Medicare must spread much of the projected increase in its costs across the remaining 30%.
Norman Ferson, 71, a retired software-company manager from Austin, Texas, said he expects his meager bump in Social Security benefits next year will be consumed by higher Medicare premiums.
“There’ll be nothing left for anything else,” he said.
If you make $127,200 or more in wages, your tax hit will be $539, unless you are self-employed, then it will be $1078.
This will make the tax man very happy.
Governments always want wages to rise and property values to rise. That way, they can waste more and more of your tax dollars.
Mike “Mish” Shedlock
So they are basically eliminating the SS income “cap”, gradually by stealth.
Actually, I don’t have a problem with this.
(Disclaimer: I don’t pay payroll taxes anymore)
It makes the tax a little less regressive and will help push the SS “insolvency date” further out into the future.
I’m not too worried about Social Security (can be tweaked by holding COLA down or bumping up withdrawl by a year or two). On the other hand, medicare and medicaid getting out of control.
FY2016 outlay for medicare + medicaid … $1.417 trillion
FY2015 … $1.296 trillion
https://www.fiscal.treasury.gov/fsreports/rpt/mthTreasStmt/mts0916.pdf
How surprising that you dont “have a problem with the ramped up caps” seeing that you dont pay for it.
I tell you what…you’ll care when they come to raise a tax that you do pay for….
Even though I’m affected, I don’t have much a of a problem. The cap seems to go up a little every year anyway. it’s just going up more this year than most.
There is no SS insolvency date. SS will always be paid out as long as it’s still being collected. It may not buy much in the future, but it will be paid.
Increasing the SS cap is the wrong way to fix SS.
When Bismarck initiated a form of SS in Germany, in the 1880’s, the age for benefit collection was set at 75, at a time when life expectancy was around 40. It was later revised down to 65, in the early 1900’s. With expected life spans approaching 80 and the birth rate slowing, we still allow some to collect early at 62 with “full benefit” retirement age at 66.
We must start raising retirement age aggressively. In the normal course of events, as you raise the retirement age the amount of taxes required for funding would go down. The tax savings could go into individual retirement accounts, that would more than cover lost benefits. In addition, more people would continue working until the higher retirement age, adding to tax revenues.
However, “normal course of events” is no way to describe government programs.
“This will make the tax man very happy.”
And Warren Buffet
Back in 2012 Buffet backed Obama’s tax increase. Why not? The real hit to people with ORDINARY income – higher marginal tax rate and bump in payroll tax. Aside from a raise in dividend / capital gain from 15% to 20% no real hit to WEALTH.
Warren Buffet via Berkshire Hathaway a master at tax avoidance.
Warren Buffet takes an income of $100,000 per year (Steve Jobs was $1/yr). This is why those tax increases don’t affect him, as they are ‘income’ taxes, not a wealth tax.
The rich know how to play the game.
Stephen Schwarzman, the billionaire private equity dude – better remembered for his comment re the tax increase (proposed raise in carried interest tax) was akin to Hitler attacking Poland in 1939. Back then read he paid himself a $300K salary … and a $300 million dividend.
The rich can pay the same damn rate as the person in the street.
“The rich know how to play the game.”
Because they create the rules and therein lies the problem.
The purpose of government is to protect private property and to protect common property. All taxes should be on the ownership of private property and the private use of common property (pollution). Get rid of the income tax altogether. The above would have those who most benefit from government pay for government.
That sounds like a plan!
There is nothing more insidious than taxes on activity. Whether nominally on “income” or “consumption,” it requires an entire society oriented around reporting what they do, and what their neighbors do, to government.
In addition to property taxes, tariffs are OK as well, as long as government are charged with monitoring goods and persons flows across the border anyway.
As far as property taxes go, limit it to real property. You cannot reasonably hide that from government, while at the same time expecting government help enforce your claim to it (packing up a chunk of Texas and hiding it in a Swiss bank just doesn’t work too well….). For all other sorts of property, taxing it requires, just like activity taxes, a basically unlimited spy and rat-out-your-customer apparatus in place. Besides, it is literally nobody’s business how many bonds someone else has tucked away in a vault, as it in no way infringes on anyone elses freedoms. While OTOH, building a fence around a chunk of land that is otherwise freely available to all, will always be a construct of a society. Hence charging those who avail themselves of that privilege, is not such an obvious case of straight up theft.
I prefer a tax system based on imports and estates. Taxes on imports are for the protections dealing with foreign countries. Taxing an estate does the least harm to the deceased because you can’t take it with you.
Taxing exclusively at discrete events like death, as does all artificially imposed “hard knee” points in cost curves, ends up requiring really intrusive government. Since people would end up optimizing, by “selling” their estates to their kids a day before death and such. And then, an army of judges and politicians “adviced” by “experts” and “Think Tanks” hired by lobbyists, has to make all manners of arbitrary decisions about what is allowed and what is not. And the decisions will always favor the same well connecteds as today’s tax code.
Even with annual valuations like today, untold millions are being spent on hiring tax lawyers to figure out the optimal way to shift valuations and income across calendar dates. And even with estate taxes being a simple side show like today, tax motivated “estate planning” is still a big business. Obamacare is another example of a similar distortion, with “everyone” suddenly hiring for just enough hours to fall below the Obamacare full time requirement.
Smooth curves are virtually always preferable, as they don’t create incentives for as much tax motivated “creativity.”
^^ Bam Man…
Yeah. I bet you dont mind it…seeing you admit you are the one paying it.
Oh …and Soc. Sec isnt a Welfare program or entitlement but rather a defined benefit retirement program based (in part ) on what one pays in.
Too bad we have voters like you believing it should be welfare.
Consider if you are self employed that you are paying 6.2% x 2 so over 12% of your income as just Soc. Sec taxes. That’s in addition to the Medicare taxes on ALL your income, the property taxes you pay on your house, your sales taxes you must pay with your post-tax money , various licensing/occupational taxes, State income taxes, transfer taxes on real estate, Obamacare 3.8% “surtax” on investments, capital gain taxes, interest and div. taxes…the list goes on and on…
But hey… you dont mind do you? It’s all good, right? Staving off the ole financial crisis yet another day.
Look buddy…The govt doesnt have a lack of revenue problem…it has a major spending problem. And that simply cannot be successfully fixed by raising taxes – including the Soc Sec. taxes that you dont mind (and dont pay) paying.
Rant off. I’m at work right now and thinking about 50% of my life blood being sucked out of me by force , payable to a Govt that just blows through it and doesnt even write me a thank you note.
I don’t have like-ability, so thumbs up to H.H. Agree we are being taxed to death and the idiocracy has no clue. Hellary will double down on the taxes. Why bother to work?
Just part of the shell game… that’s all.
And of course most people making that much will not actually be allowed to collect social security; or, more correctly, will have it taken back via taxes as is done today for anyone who bothered to plan for their retirement.
“Apple has all but thrown in the towel on its self-driving car endeavors.”
Whoopsiedoodle!
Caught that one… That leave Google/CIA to run the “Progrom”… probably as planned.
Oh joy, another tax increase for those of us who are the “super rich”. On top of my $36’000 for my health plan because I have a family.
Oh, please, cry me a river….’Merika is just so awful.
BTW…the exit is right over that’a way.
Which way? If Hellary is elected might need to use it.
I use Humana Medicare Advantage. Just did an analysis of my medical bills for the past couple of years. Total bills = 80,382, Insurance/Medicare paid 30,453. I paid 2,279. Of course, I paid my Medicare premiums and my Humana premiums (total around (4,300). But still.
I spent one day in the hospital having a heart cath. 2 knee scopes which were outpatient. Doctors and hospitals have to take what Medicare pays and can’t bill for the balance. I get my 2 drugs for free from Humana’s mail-order pharmacy. Excellent medical care, great hospital and doctors. All necessary specialties in our town here in NW Montana. Just had my thorough annual Medicare-paid physical with all labs and free shots this morning.
If Medicare and Medicaid are going broke, I think I can understand why.
I didn’t see any reason for the increase in wages subject to SS. Where did 7.3% come from? Do they just get to pick any number they want? Is this mandated by Congress? Obviously I’m effected or I wouldn’t be bitching so much…
Anyone? Anyone? Bueller?
Bueller took a sick day.
I pay this tax and will be affected. I hope to live a very long life and get back more than I put into SS. Of course, given the choice, I would have preferred to not pay the tax from the beginning and receive no benefits. I can plan for my own retirement.
I’ve been sucking up SS for 3 1\2 years now and figured out how much was paid in, ect vs hpw much i would draw and it came out pretty close to when obamacare cuts off proceedures I can receive.
This might affect you, even as an independent contractor. All the more reason to create passive income and route it through a Roth 401K to avoid taxes otherwise pissed away on presidential vacations, Hillary’s wardrobe, etc.
“Governments always want wages to rise and property values to rise. That way, they can waste more and more of your tax dollars.”
Except wages are not rising. Mine anyway. This will just be a dead loss of money to my family. It will be wasted by the government
Government’s job is to redistribute wealth from the producer to the consumer ( itself)
No, that is not the job of government. But it does happen to be the way our government works, now.
I always looked forward to the day when I reached the max and social security stopped being taken out. Also remember your employer also matches the amount you pay – this is a massive tax increase and I personally have not seen wage increases to compensate. Also one of the commenters had asked how it is calculated – the formula is no secret it is a law and can be found on Google. Also another commenter mentioned all the taxes we pay – it is getting ridiculous – income – property, sales taxes, fees, higher cap gains, higher monthly insurance and higher deductibles.
Lord help us when Hillary gets elected if you think it is bad now. Exiled it to get a lot worse.
This mainly because there is no inflation, I’m sure.
I gave up self employment two years ago. 15.3% self employment tax, 25% federal marginal tax, 6% state tax, then $15,000 yr in forced health insurance in spite of my efforts to keep myself healthy. That ended up as 60% marginal tax on a middle class income. Sorry guys, it did not make sense……