The ‘$40 Per Paycheck’ and Other Payroll Tax Cut Fibs
March 2, 2012 - 12:29 am
In mid-February, during the run-up to the extension of the two percentage-point cut in the Social Security payroll tax to year’s end, the White House, using garbled language sadly not unusual for this bunch, claimed that:
Currently, 160 million Americans benefit for the tax relief that’s set to expire at the end of the month. The typical family saves about $40 with every paycheck.
Neither statement, even after grammatical correction, is anywhere close to being true. We can add both to the pile of falsehoods which will be as thick as a major metro area phone book by the time they’re all done.
A commenter at another site gave Team Obama’s penchant for quickly disseminating and perpetuating persistent fibs while fiercely resisting attempts at correction an interesting term to remember and employ: “viral lying.” The administration’s mendacity on the Social Security tax cut certainly exemplifies it. Meanwhile, establishment press lapdogs, who routinely invented alleged “lies” which weren’t lies at all during George W. Bush’s eight years, have allowed both howlers above to slide with little if any objection, missed glaring inconsistencies in messaging, and have occasionally been duped themselves.
Let’s start with the “160 million Americans” claim. There are at least two problems with it:
- According to the 2011 annual report of Social Security’s Trustees, “an estimated 157 million people had earnings covered by Social Security and paid payroll taxes” in 2010. Augmented by the economy’s tiny 2011 improvement, that number probably was about 160 million last year. But this does not mean that 160 million Americans are “currently” working. As of January’s employment report, using the more inclusive Household Survey, total employment, including self-employment, was only 141.6 million.
- Additionally, not all workers are forced to participate in the Social Security train wreck. At the Coalition to Preserve Retirement Security, which should really call itself the ”Don’t Force Us to Join Everyone Else’s Bankrupt System Coalition,” the organization’s mission statement tells us that “6.6 million public employees are covered by state or local plans in lieu of Social Security.” Other exempt persons “currently” working would include certain students, federal employees hired before 1984, and members of a few religious groups.
Thus, the administration has overstated the number of American workers who will “currently” benefit from the tax cut by roughly 20%.
Obama’s “$40 per paycheck” for “the typical family” assertion is a far worse fairy tale.
The statement is only true in very narrow circumstances, namely single-earner households where the person employed makes $52,000 per year in taxable Social Security wages and is paid every two weeks. The trouble is, according to a 2009 human resource consultant’s presentation, most employees (though I believe it’s a bare majority) are paid weekly (note the spelling; almost everyone thinks they’re paid “weakly,” but I digress). Workers paid every seven days who are unfortunate enough to actually buy the administration’s “$40 per paycheck” fib, in conjunction with White House statements that “the typical family” earns about $50,000 a year, are being misled into believing that the tax cut is far bigger than it really is. A worker paid weekly will only see an extra $40 in each paycheck if he or she makes a far from weak $104,000 per year, which is hardly “typical.” A two-income couple making a combined $50,000 per year where both are paid weekly might actually believe that the tax cut will give them a total of $80 every week in their two paychecks. Don’t spend it, folks, because you’re not going to see it.
On February 14, the White House blog trumpeted how “The President was joined by Americans who have shared what $40 a paycheck means to them, and who would be affected if Congress doesn’t act.” There is virtually no chance that everyone pictured at the gathering is really receiving $40 more in each paycheck as a result of the cut.
Even administration officials can’t keep their story straight — or they are deliberately allowing distortions which create an exaggerated impression of the tax cut’s impact to appear. White House spokesman Jay Carney has twice claimed that the cut involves “$40 a week.” A White House sob stories blog post contains at least three entries showing that some respondents undoubtedly thought that $40 a week was the amount at stake:
- “$40 a week, quite simply, is the difference between my son having what he needs and not having what he needs.”
- “We can’t afford to lose $40.00 a week.”
- “It’s simple. $40/week is over $2,000.00 per year which low income families need to provide housing, rent, food and necessities for their children, especially those who are in school in rural areas.”
Over two dozen of the entries refer to how $40 would help pay for gas. It turns out that for many two-car families, the tax cut won’t even pay for the increase in the price of gas since Christmas.
Not that it’s particularly difficult, but the press has also been fooled. At ABC’s Political Punch blog, Mary Bruce touted Obama’s “victory lap” after the related bill’s recent passage, and wrote that the tax cut “will help middle-class Americans by providing an extra $40 a week in their paychecks.” Anna Fifield at the Financial Times also bit. David Espo at the Associated Press did a Certs imitation (two errors in one sentence) when he wrote that the cut means “an extra $20 a week in the average American paycheck.” No, David. With the multiplicity of pay frequencies, there is no such thing as an “average American paycheck.” Also, gross pay per week in the “average paycheck” is almost $900, leading to a tax cut of roughly $18 per week; the median is $718, a cut of a bit more than $14.
For all the huffing and puffing, this particular propaganda effort probably won’t have much impact on public opinion. When the National Credit Counseling Foundation asked people what they did with their tax cut last year, “Two-thirds said they didn’t even realize their paychecks were larger.”
The administration’s actions, with the unfortunate acquiescence of House and Senate Republicans, are hardly consequence-free. For a second consecutive calendar year, the federal government’s budget deficit will be over $100 billion higher than it otherwise would have been because of a tax cut built on viral lies which will stimulate nothing but the rise in the debt burden future generations will inherit.