January’s paycheck surprise
Congress adjourned recently without taking any action on the income tax rates applicable for 2011. As it stands now, everyone, not just the “rich” will see a larger chunk of their salary removed from their paychecks beginning January 1.
Here’s the problem. Traditionally, by mid November the IRS issues the tax withholding tables that employers must use for the following calendar year. That is not likely to happen this year. Congress is not scheduled to reconvene until November 15, and will recess shortly thereafter for Thanksgiving. In the Senate, at least, there are several non tax issues that will be considered, leaving little if any time to deal with taxes. Any delay past December 1 will make it virtually impossible for many employers to update their payroll systems to reflect the 2011 tax rates.
According to Dennis Danilewicz, director of payroll for New York University’s Langone Medical Center, and recent president of the American Payroll Association,
[i]t takes large employers three to four weeks to process and test these changes, and the government needs time before that to determine and publish [the withholding tables]…[and] large firms often run payrolls a week or two ahead of time…
So, as they say, time is of the essence.
Lawmakers’ recent track record on dealing with tax matters doesn’t inspire confidence that they will act with dispatch. Congress has yet to resolve the estate tax, which expired at the end of last year and is set to snap back to high rates come January. Nor has it tackled the alternative minimum tax for 2010, a levy that is set to hit 32 million taxpayers this year, compared with five million last year.
The IRS can’t simply assume what Congress will do, and issue withholding tables in accordance with that assumption. And, even if Congress leaves all of the current tax rates in place,
there are enough differences between 2010 and 2011 numbers, such as inflation adjustments, that payroll executives still need weeks to update and test their systems.
When January 1 rolls around and and the inevitable incorrect amounts are withheld from people’s paychecks, we will no doubt hear that the mess was created by the Republicans, the “party of no”. But, don’t believe it.
For the past 18 months the House, the Senate and the Oval Office have been controlled by the Democrats. They could have done, and in fact did do, virtually anything they wanted…see: Obamacare, the Stimulus Bill, the Financial Reform Bill. To have done nothing about taxes when that issue was a part of President Obama’s 2008 campaign promises is a complete dereliction of duty.
The real reason nothing was done was that many Democrats said no, and refused to raise taxes on anyone during “the worst economic times since the Great Depression”.
Under the circumstances, can you blame them?
11 Comments
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No federal budget, no tax tables etc. What has the "most ethical Congress ever" been doing in lieu of their jobs?
Dims they are blaming Bush. If he hadn't cut taxes to begin with this wouldn't have happened.
Apparently, Tom, the "buck that stops here" never sees the light of day in the Øbama Oval Office. Blaming Bush is easy, reflexive and inaccurate.
The answer is to minimize the amount of taxes taken out of our paychecks. And when April 15th rolls around, DO NOT write a check for the balance. This is the only time when watching someone go through withdrawal will be fun.
The most important part that the Dems (tax more) and the Repubs (cut taxes) always forget is: Spend less. 2011 budget is equal to or less than 2009 received tax revenue.
Pssst ! Congress, want to spend more? Set up conditions to promote more non government employed taxpayers.
This income tax rate bungle by Congress is more proof that the system is broken.
The system being all of the Goverment officials and lobbyists. The system needs to be replaced – back to basics please.
The Constitution and the structures in DC are fine. It is the fools that need to be swept out of there.
I find it illuminating that our resident liberals have nothing to say about this. Or the newly announced Social Security benefit freeze…..
Another tempest-in-the-teapot. One can always under or over-withhold. What is due on April 15 is what matters. As to the no increase in Social Security benefits, it's a lousy deal. But, the formula has been in place for a long time and neither the Dems nor the Reps are "interested" in changing it to reflect the conditions of the 21st century.
Aren't Social Security increases directly tied to the rate of inflation? Consider that the Feds are artificially keeping the prime rate down. Those who paid into Social Security will NOT be getting an increase. And prime rate tampering or not, prices have gone up. Fine Americans on the short end again.
Just like "Don't mess with mother nature", "One should not falsify the prime rate"
And I do believe that the latest tampering with the prime rate started under a the watch of a Republican President.
Social Security is just like Øbamacare: everyone will get it, but you won't get much.
The more gov't screws around with stuff, the more screwed up it gets.
Social Security benefits increased 2.3% for 2008 and 5.8% for 2009. Meanwhile the 401(k)s tanked and became 201(k)s or worse (see all the Ponzi schemes that were uncovered).