Thanks to Washington, nearly everyone will pay more in taxes in 2013. Somehow people think it's just the wealthy. It's not.
Republican Gov. Scott Walker, a potential 2016 presidential candidate, frequently tweets on national political issues from @ScottKWalker. As the fiscal cliff deal approached, Walker pleaded with Washington not to "screw up" the economy by letting taxes go up. He then criticized the eventual deal in a series of tweets, culminating with this bipartisan slam on Jan. 4, 2013: "Thanks to Washington, nearly everyone will pay more in taxes in 2013. Somehow people think it’s just the wealthy. It’s not." Walker poked at "Washington" again in his Jan. 15, 2013 "state of the state" speech, saying federal officials were putting more money in the hands of the government, not the people. Much of the fiscal-cliff debate, which ended in a New Year’s Day deal, focused on whether to extend the across-the-board reduction in federal income-tax rates approved in 2001 and 2003 under President George W. Bush. Those lower rates were due to expire at the end of 2012, but the cliff deal extended them. For almost everyone, that is. The deal locked in the reduced Bush-era rates for taxable income up to $400,000 (single filers) or $450,000 (joint). For the portion of a filer’s taxable income above those amounts, the tax rate will rise to 39.6 percent, the Clinton-era rate. Fewer than 1 percent of US households are expected to report taxable income above those thresholds in 2013, a Tax Policy Center study found. The deal kicks in a few other tax increases for wealthier folks, adding to some that were approved as part of federal health care reforms. But income-tax rates for most people will not change. So what does Walker mean when he says, "nearly everyone will pay more in taxes in 2013"? When we asked for backup, Walker campaign spokeswoman Nicole Tieman sent us a Wall Street Journal blog item on the deal’s failure to extend a different tax break -- the Social Security payroll tax holiday of 2011 and 2012. The holiday came from President Barack Obama as a continuation of Democratic-backed measures passed in the 2009 stimulus package. It reduced the worker share of Social Security taxes taken off paychecks from 6.2 percent to 4.2 percent. For example, that gave workers making $75,000 to $100,000 an average break of $1,194 on federal taxes in 2012, another Tax Policy Center study found. The average across all income levels was $721. In 2012, Obama initially sought to extend the payroll break again, but Republicans were split on it, and some Democrats weren’t thrilled with it either. So Obama and Congress let it die a quiet death. Three experts told us a large share of Americans will see their taxes rise in 2013 compared to 2012 because of the disappearance of the Social Security payroll tax holiday. Some 77 percent of all U.S. households will be paying more in taxes overall in 2013 than in 2012, almost completely because the payroll tax is returning to its old level, said Roberton Williams, a fellow at the Tax Policy Center, a project of the Urban Institute and Brookings Institution. William McBride, the chief economist at the business-backed Tax Foundation, told us that "anyone with a job that pays wages is affected, so, a high percentage of the population." He said that 83 percent of tax returns report some wages. Chuck Marr, director of federal tax policy at the left-leaning Center on Budget and Policy Priorities, confirmed it would hit "every paycheck." So, Walker is on to something regarding the payroll tax, though Williams said "nearly everyone" was a bit of a reach. There are a couple other important points to cover about Walker’s claim about the deal, formally known as The American Taxpayer Relief Act of 2012. Marr and Williams noted that Walker’s description is just one of the ways to look at the tax situation. "Is it actually a tax increase, or are we just not giving you a break anymore?" asked Williams. Unlike the Bush-era tax cuts, which Republican sponsors tried repeatedly to make permanent, the payroll tax was designed as short-term boost to the economy, Williams said. Marr called the Social Security tax holiday a political orphan, with neither party much interested in fighting over keeping it. If Washington had not acted on the payroll and income tax rates,90 percent of Americans would have seen a tax increase, Williams said. In blaming Washington for the tax increase, Walker takes into account the decision to end one break -- the Social Security payroll cut -- but does not factor in the new life that Congress and the president gave to another break, the income tax cuts that were extended for most. Our rating Walker tweeted, "Thanks to Washington, nearly everyone will pay more in taxes in 2013. Somehow people think it's just the wealthy. It's not." From the perspective of the real net effect on people’s tax rates compared to last year in the wake of the deal, Walker’s claim about the fiscal-cliff legislation rings pretty true, depending on your definition of what constitutes "nearly everyone." The expiration of the Social Security payroll tax holiday means that tax will revert to higher, pre-2011 rates for everyone who earns a paycheck, though a minority of tax filers have no wage earnings. But he makes a glass-half-empty claim about a broad deal by viewing the result in a narrow context of one tax decision, while leaving out important information about the tax effect of another major decision that was part of the deal. It would also have the ring of truth to say that "thanks to Washington" a massive tax increase was averted in the same deal. But then, he only had 140 characters to work with. We rate Walker’s claim Half True.
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