re: #215 Vicious Babushka

The change in the payroll tax from 4.2% to 6.2% was part of the expiration of the payroll tax holiday enacted by Congress and the President. That will cover nearly all of the increase in tax withholding you’ve seen (unless you’re making serious coin, in which case, you’d see higher withholding in the top tax bracket). In other words, Congress chose not to extend the temporary tax break on the payroll tax that funds Social Security, thereby improving the solvency of that program that everyone (except the rabid right wing - but I repeat myself) agrees is worthwhile and important part of the safety net.

It’s a fair cop to blame Obama for the expiration of the payroll tax break. Taxes did go up - but they’re directly funding a program whose utility is (other than the RWNJs) considered sacrosanct.

The tax deal also increased commuter mass transit tax breaks to $240 a month - matching the break offered for commuter parking. The 2012 break was reduced to $120, so commuters see a significant break - about $1,200 for the year. That almost offsets the payroll tax change.

The remaining tax breaks and credits don’t affect most people. The 2012 tax rates will carry over into 2013 except for the top tax bracket, who will now have higher rates. But that means for anyone under $400/450k, they’ll see the same federal income tax rates as they did in 2012. Capital gains may change depending on the threshold levels, but most people don’t see capital gains.

The game changer is making the AMT patch permanent. The AMT used to require an annual patch, and when the CBO and JCT would score budget plans going out 10 years, they’d have to report that the plans would resolve more revenue than they should because the AMT would revert to the original levels and hit more taxpayers. The patch would manually adjust the levels and reduce income going forward.

That’s why the CBO/JCT scoring on the 2012 tax act was $4t - $1.8t of that amount was taking into account making the AMT patch permanent, even though the AMT was patched annually. Going forward, the CBO and JCT can’t take the AMT into account - so the scoring will be more accurate. It means Congress wont be able to play nearly as many games as they would otherwise.