Promises can be tricky things.
The party of the first part can be well-meaning to the party of the second part, yet the well-meaning promise may still be broken.
Sometimes the parties may even disagree about whether the promise was kept. The promise may have been indefinite in terms.
The culprit may instead have been “force majeure,” French for “a greater force.” Contracts use this phrase. Political promises do not.
Dad promises to take son to the park on Saturday. Ah, but Dad’s boss assigns him a special project for Saturday. Or an unexpected rain or snowstorm spoils a park outing.
The reason for the cancellation matters little to the typical child. A promise was made. That promise was broken.
President Joe Biden promised not to raise taxes on those making less than $400,000 per year. His political opponents have already made silly arguments that he broke that promise. For example, tobacco taxes went up.
But do the below one percenters now have something to complain about? Social Security payroll taxes will rise $818 next year for the pretty well-off.
“Pretty well-off” is below $400,000. How far below? About 60% percent below. If you make $160,200, you’re paying the $818 extra. So is your employer. That’s $1,636 total.
Self-employed you say? Well then, you’re paying both halves of the tax increase. There’s a wrinkle in the computation, but you self-employed $160,200 earners will pay $1,512 more.
How could this happen? Well, every year the maximum wages subject to the OASDI tax, which stands for old age, survivor, and disability insurance, is inflation-adjusted.
In 2022 the maximum wages subject to this 6.2% tax was $147,000. In 2023 it will be $160,200. Congress had no part in this. OK, they did pass the inflation adjustment thing, but that was back in 1975.
A 32-year-old Joe Biden was a senator from Delaware in 1975, so I suppose you can toss a tomato or two his way. But that was long before the no tax increase pledge to the pretty well-off.
Perhaps Biden should argue force majeure. That is, just like a royal flush beats four-of-a-kind, maybe inflation is that greater force that beats a no-tax promise.
I don’t think there are any rules on the inflation vs. no tax increase thing. You can’t even make a movie to resolve the issue, like King Kong vs. Godzilla did. Perhaps this is more of an indefinite promise.
Here in New Mexico, earning $160,200 by yourself puts you in the top 4% of individual earners. You’re not one in a million, but you are one in 25 and pretty close to a one percenter.
What if you live in a high-income state, say another “new” state (there are three) like New Jersey? The affected group now expands, with a full 11% of individual earners reaching $160,200.
Biden carried New Jersey by 57% to 41% in 2020. But that was only slightly more than the 54% to 43% that he carried New Mexico.
Ask those high-income New Jersey people, “so, is youse guys mad at Biden,” and their Biden anger is likely offset by annoyance at the cap Trump put on their state tax deductions.
Is this a broken promise? Do people care? Maybe those in the “Land of Enchantment” and the “Garden State” are too consumed with the beauty of their aptly named states to worry.
But what about that other “new” state? New Hampshire. Biden carried that by 53% to 46% in 2020. It’s a beautiful state. Surely, it’s motto reflects that natural beauty.
That motto? “Live free or die.” Oh boy. Hope that’s not intended to be taken literally. If so, Biden may want to avoid visits to Manchester when the workers see their January 2023 paycheck.
But hold on. They’ll see something else also. The income tax rate brackets are also inflation-adjusted. This will increase their paycheck!
Did Biden break his promise? If you think yes, I presume you’ll give him credit for the tax cut that follows the inflation adjustment to the income tax brackets. I suspect you won’t.
Political promises are always indefinite and therefore subject to interpretive success or failure. Yet the politicians keep making them.
Jim Hamill is the director of Tax Practice at Reynolds, Hix & Co. in Albuquerque. He can be reached at jimhamill@rhcocpa.com.
