President Barack Obama made an impressive speech regarding the economic condition of America. He pressed the idea that the middle class will not be impacted by the tax hikes, but it wasn't entirely true.
That statement refers to income tax rates for all of the lower middle class and some of the upper middle class. In addition he didn't cover the fact that the FICA rate will increase from 4.2 to 6.2 percent.
To clarify the definition of the focus group term middle class, it is subdivided into upper and lower groups. The earnings for each group that places them in the middle class range is dependent on which independent study you rely on. The Drum Major Institute defines middle class as white-collar professional/managerial workers who earn between $25,000 to $100,000.
The upper middle class is defined as those who earn at least $62,500 according to Joseph Hickey, Dennis Gilbert, William Thompson, sociologists. Lower middle class are those in technical positions earning $32,500 to $60,000.
So in Obama's statement you can see that those in the upper middle class earning $75-100,000 will be affected.
Furthermore taking in consideration that there is a cap on what you can pay into Social Security, those that do not meet that cap will see a two percent hike in FICA payments.
The temporary two-year Social Security payroll tax reduction expires this year and the rate will be hiked up to 6.2 percent increasing the FICA payment by at least another $60 per month. FICA payroll tax deduction for those persons earning $75,000 and $100,000 will pay approximately $1,200 more this year according to the Tax Policy Center. Those who earn $40-50,000 will pay $574 more in FICA payroll tax during 2013.
The U.S. national individual median income average is $32,000 or $46,000 per household and those individuals who cannot afford less discretionary income will also see a two percent increase in FICA tax.
The expiration on Bush Tax cuts significantly affects one percent of Americans whose individual earnings exceed $400,000 and couples earning excess of $450,000. The expected tax collection from that group is $620 billion in new tax dollars.
Because of the extension of the Bush Tax cuts for those in the top one percent, the national deficit will increase by $4.6 trillion dollars over the next decade according to a Jan. 4, report issued by the Congressional Budget Office. Which is less than it would have increased if everyone was provided the extension.
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