The new tax deal ends the Making Work Pay credit, which gave a tax reduction of up to $400 to workers with low and middle incomes. That credit will be replaced by a 2 percentage point decrease in the payroll tax for Social Security for people of all incomes.
However, more than six million federal, state and local government employees do not pay into Social Security at all. Instead, we pay into public pension systems-- that is if you work enough hours to pay for the privilege to have a retirement account in the first place. Many under-employed and involuntary part time public employees, including those who are represented by CSEA, will lose the $400 credit and will not reap any benefit from the payroll tax cut. In fact, they might be paying more in taxes for earned income this year.
According to the most recent statistics by the House Ways and Means Committee, more than 174 million workers paid into Social Security in 2007, but about 5.7 million state and local government employees paid into other pension systems. While the federal government has been moving its work force into Social Security in recent decades, there were still 600,000 employees excluded from it in 2007.
Some tax experts say that it is unfair for a $900 billion tax cut package to give a quarter of its benefits to the top 1 percent of wage earners while forcing public sector workers, who are largely lower and middle class, to have to pay more.
“It makes so little sense that you have to hope that the people who negotiated this didn’t think it through,” said Robert McIntyre, director of Citizens for Tax Justice, a public interest group aligned with unions. “And when they do think it through, they’ll realize it’s not fair. It would be cruel not to do something about it.”
Amy Brundage, a White House spokeswoman, acknowledged that the current version of the plan could result in a higher tax bill in 2011 than 2010 for some government workers. But she stressed that the plan would nonetheless spare them, and all taxpayers, a much steeper increase that would have resulted if no deal had been struck and all the Bush tax cuts were allowed to expire on Dec. 31.
While Mr. Obama had proposed an extension of the Making Work Pay credit, the $120 billion payroll tax reduction worked out is twice as large and will offer a break of up to $2,136 each to millions of middle- and high-income taxpayers.
While many Democrats have criticized Mr. Obama for abandoning a campaign pledge to let the cuts expire on the wealthiest 2 percent of wage earners, Ms. Brundage said that the president did so only after winning the extension of an assortment of credits for low-income Americans and a 13-month extension of unemployment benefits.
Leaders of the American Federation of State, County and Municipal Employees were muted in their reaction to the prospect of more taxes for public employees. Please stay tuned to the CSEA Voice Reporter for future details about this development.
AFSCME spent nearly $90 million to help elect Democrats during the last election cycle. This hardly what we at the Voice Reporter would call a return on our investment. “We are aware of it,” said Gregory King, a union spokesman, “and we are discussing it with the appropriate leaders in Congress.”
When filing you taxes, please go to the IRS website or call toll free at 1-800-829-1040. Or, consult your tax professional or ask your employer for additional help and information.
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The new tax deal signed into law for 2011 turns out to be a bummer for public employees. Some workers can expect to pay a higher tax bill in 2011 while the top 1 percent of wage earners will get major relief. (photo provided) |
Rochester, N.Y.-- At a time when state and local governments across the country are imposing furloughs and layoffs, and President Obama has frozen pay for federal employees, it turns out that one of the few groups to face higher federal taxes this year will be public sector employees.
The new tax deal ends the Making Work Pay credit, which gave a tax reduction of up to $400 to workers with low and middle incomes. That credit will be replaced by a 2 percentage point decrease in the payroll tax for Social Security for people of all incomes.
However, more than six million federal, state and local government employees do not pay into Social Security at all. Instead, we pay into public pension systems-- that is if you work enough hours to pay for the privilege to have a retirement account in the first place. Many under-employed and involuntary part time public employees, including those who are represented by CSEA, will lose the $400 credit and will not reap any benefit from the payroll tax cut. In fact, they might be paying more in taxes for earned income this year.
According to the most recent statistics by the House Ways and Means Committee, more than 174 million workers paid into Social Security in 2007, but about 5.7 million state and local government employees paid into other pension systems. While the federal government has been moving its work force into Social Security in recent decades, there were still 600,000 employees excluded from it in 2007.
“It makes so little sense that you have to hope that the people who negotiated this didn’t think it through,” said Robert McIntyre, director of Citizens for Tax Justice, a public interest group aligned with unions. “And when they do think it through, they’ll realize it’s not fair. It would be cruel not to do something about it.”
Amy Brundage, a White House spokeswoman, acknowledged that the current version of the plan could result in a higher tax bill in 2011 than 2010 for some government workers. But she stressed that the plan would nonetheless spare them, and all taxpayers, a much steeper increase that would have resulted if no deal had been struck and all the Bush tax cuts were allowed to expire on Dec. 31.
While Mr. Obama had proposed an extension of the Making Work Pay credit, the $120 billion payroll tax reduction worked out is twice as large and will offer a break of up to $2,136 each to millions of middle- and high-income taxpayers.
While many Democrats have criticized Mr. Obama for abandoning a campaign pledge to let the cuts expire on the wealthiest 2 percent of wage earners, Ms. Brundage said that the president did so only after winning the extension of an assortment of credits for low-income Americans and a 13-month extension of unemployment benefits.
Leaders of the American Federation of State, County and Municipal Employees were muted in their reaction to the prospect of more taxes for public employees. Please stay tuned to the CSEA Voice Reporter for future details about this development.
AFSCME spent nearly $90 million to help elect Democrats during the last election cycle. This hardly what we at the Voice Reporter would call a return on our investment. “We are aware of it,” said Gregory King, a union spokesman, “and we are discussing it with the appropriate leaders in Congress.”
When filing you taxes, please go to the IRS website or call toll free at 1-800-829-1040. Or, consult your tax professional or ask your employer for additional help and information.
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