Expiration of Federal Tax Holiday

Starting with your first paycheck in 2013, the full amount of federal Social Security will now be withheld from all workers’ paychecks.  This 2% decrease in your take-home pay is actually a return to the payroll tax rate that was temporarily lowered two years ago to help stimulate the economy during the economic slowdown.

The payroll tax is used to fund Social Security. Congress never intended for the payroll tax cut to be permanent. Republicans wanted the tax cut to expire a year ago, while Democrats fought to keep it for another year and continued the reduction of workers’ Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages for another year.

The payroll tax reduction came with a congressional pledge to replace the money into Social Security, but Congress never replaced the money, which ultimately has added more to the national debt.

Your paycheck this year will also have a slight increase in your contribution for Medicare. As with the Social Security deduction, this deduction was cut two years ago as a temporary measure.

Unlike the 3% mandatory contribution mandated by the legislature, this increase has nothing to do with your state legislature, District School Board or Union.  This was a Federal decision.

FRS UPDATE:  The FEA case challenging the constitutionality of the mandated 3% contribution toward FRS is still in the hands of the Supreme Court justices.  At this time, there has been no word as to when they will issue their decision.  USEP and FEA will keep you posted as soon as a decision is announced.  In the meantime, remember union member dues are funding this expensive court battle.  If you’re a member, thanks; if not, please join.  See card attached.