Guess What: Your Taxes Went "Up"

Trey Smith

By now, American readers have learned via the President and congressional leaders that a compromise was hammered out to forestall the [manufactured] "fiscal cliff." In patting themselves on the back, they have announced far and wide that taxes for the middle and working classes will not go up in 2013. This announcement turns out both to be true and very misleading to the point of being false.

For starters, had the Bush tax cuts been allowed to expire, the tax rates would have been restored to their previous levels. You see, the tax cuts were supposedly temporary ones that offered a brief respite from the official rates. Returning to those official rates does not constitute a tax increase -- only the cancellation of the discount -- but, in the lexicon of Washington insiders, any time taxes go up for ANY reason, it is labeled a tax increase.

Based on their own definition, the President is not being altogether truthful when he says taxes will not go up for the middle class (he rarely references us po' folk). While it is true that our federal income tax rates will remain the same, the taxes we pay in Social Security taxes have increased by 2 percent.

Obama probably failed to note this distinction because the increase in the Social Security Tax Rate is yet another example of a tax rate being restored to its stated rate after allowing a period of a temporary discount to expire. As you may recall, the rate was lowered from 6.2% to 4.2% in 2010.

So, in truth, one discounted rate remains in place and the other discounted rate has been allowed to expire. The latter primarily impacts the middle and working classes because most people in these two groups derive their income from wages and wages are the type of income subjected to the Social Security Tax.

The upshot of all this is that wage earners will see their net income decrease in 2013 which is not what the President would have you believe. It's all a case of political semantics.