A PAY CUT OR NOT A PAY CUT, THAT IS THE QUESTION

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I recently wrote a piece for www.TheStreet.com about theexpiration of the 2% payroll tax “holiday” titled “Everyone Got a 2% Cut InPay”.  A reader commented –
“’So starting Jan. 1,everyone got a 2% cut in pay!’  WRONG,wrong, wrong!!!  The rate went back towhat it had been for YEARS.”
We are both right.
Beginning with the first paycheck issued in 2013, all employeeshad 2% more withheld for the Social Security component of FICA tax.  So everyone’s pay was reduced by 2% - a 2%pay cut.
But this was NOT a tax increase. As the comment writer correctly pointed out, the employee’s share ofFICA tax merely went back to the way it had been for many, many years prior tothe enactment of this temporary tax benefit.
The 2% payroll tax cut was a temporary measure that applied to2011 and 2012 only.  It was a politicalgimmick.  As I pointed out in my piece,it was the latest reincarnation of the rebate check political gimmick that wasimplemented during the Dubya years.
The rebate check/credit became the Making Work Pay Credit underBO, which was replaced by this 2% payroll tax holiday. 
The rebate check caused more problems than it was worth (as Iobserved here at the time – “These checkscost the IRS a fortune, created tons of confusion, and resulted in millions oferrors on 2008 tax returns! And it is doubtful that they did anything tostimulate the economy.”) and the Making Work Pay Credit FU-edwithholding.  As a method ofdistribution, the payroll tax holiday was “more better” (i.e. caused less administrativeproblems) than its predecessors.  But itwas a political gimmick all the same.
The original rebate check, like New Jersey’s original homesteadrebate checks, was a way to buy votes. Originally the NJ homestead rebate check went out on November 1st.  The hope was that taxpayers would say, “Lookwhat the Democrats just gave me” and run out on Election Day and vote for allthe Democratic candidates.  Prior to theissuance of the federal rebate checks taxpayers often received a letter from theirrepresentative idiot in Congress telling them that the check was coming.  “Look what the Republicans just gave me.  I will thank them by voting Republican!”
This 2% payroll tax holiday is a great example of the danger of“temporary” tax benefits.  Taxpayers getused to them, and when they expire it appears that there has been a taxincrease.  It never should have beenpassed in the first place.  It nevershould have been extended for 2012.  Andthe idiots in Congress were right not to extend it for 2013. 
TTFN