Source: Daily Jobs Update



Matt Trivisonno points us to the latest tax-withholding data. He compares January 2013 with January 2010 — before and after the FICA payroll holiday:


In January 2011, the federal Social-Security tax-withholding rate was slashed by 2%. That tax-cut remained in force for all of 2011 & 2012. In January 2013, Congress ended the tax-cut, and Social-Security withholding went back up 2%.

There have been other tax changes, but none that have a significant impact on withholding. For example, Congress boosted the estate tax for 2013, but that tax is not withheld from anybody’s paycheck. The top income-tax rate went up from 35% to 39.6%, however according to the New York Times: “Affluent households will pay the new 39.6 percent rate only on income above $450,000. They and everyone else will still pay lower rates on income below that threshold.” And a sizable chunk of that upper income revenue comes in the form of once-a-year banker bonuses.

So, we can*probably* compare raw withholding-tax collections from 2010 to 2013 and get a reasonably good feel for job growth.

The chart attached (“3-Year.jpg”) shows a 5-day moving average of the 3-year growth rate, plotted daily for the four weeks of data that we have so far this year. So, this is the growth rate of January 2013 over January 2010.

As you can see, the growth rate is 13.48%. So, that’s about 4.5% per year. Not terribly impressive, but then again, not too bad for a buyer’s market of labor. And not too strong for the Fed begin tightening.

In a few weeks, we will have enough data to discern a “second derivative” trend in this growth rate.

Because of the tax changes, year-over-year comparisons must rely upon adjustments. So, this 3-year chart will be valuable for at least the next year since it lets us use raw data.



Matt Trivisonno


Category: Employment, Taxes and Policy

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7 Responses to “January 2013 Withholding Tax +13.5% Over 2010”

  1. Terry says:

    Good insight, but I wonder what role pay increases (admittedly small) may play in the increase in withholding as well.

  2. VennData says:


    “…incomes rose in December by the most in eight years…”

  3. The Window Washer says:

    A great follow up chart would be how much of that 4.5% was the unemployment rate dropping.
    Good for tax coffers bad for workers wages.

  4. bear_in_mind says:

    @VennData: An anecdotal observation on the Reuters “Income surge puts consumers in better shape” article. Many friends and business acquaintances received an additional paycheck late-December (checks that normally would’ve been received early-January) to simplify the transition to 2013 payroll and SSA rates. Anyone’s guess how much that contributed to December’s “income surge” but I’d bet it was a factor.

  5. Vivian Darkbloom says:

    You fail to mention the 0.9 percent add-on to Medicare that applies to incomes over $250K. This should actually be added to the income tax rate because not all those funds go to Medicare. These things add up.

  6. But What Do I Know says:

    And yet, compared to last year it’s only up 3.5%. Or if you use January 2008, it’s only up 5.3% in five years (around 1% annualized) If you cherry-pick data, especially monthly jobs data, you can pretty much find what you like. . .

  7. BenGraham says:

    Why not take last Jan’s numbers and multiple by 1.48* to get a “corrected for the 2% SS rate reduction” base and then tell us what the y/y is? There’s no way to extrapolate yr 3 out from the 3yrCAGR.

    *or if last years’ includes the employer portion, use 1.163 instead of 1.48