TRTA Inside Line: Higher Federal Tax Withholdings

“Why Has My TRS Check Decreased?”
TRS Retirees Feeling a Federal Tax Squeeze
Many TRTA members are asking why their monthly annuity has suddenly decreased. Retirees are reporting a decrease that ranges between $30 per month to as much as $50 per month. The answer is that the federal government is taking a bigger bite out of your monthly income through higher tax withholdings.
One of the first questions I have been asked is “if the Bush-era tax cuts were extended, why am I paying more?” Part of the answer is that President Obama and the previous Congress extended the reduced tax bracket amounts that have been in force since President George Bush’s term. The tax brackets, however, were expanded to include more people at the higher taxable amounts. While the tax rates did not change, a person may fall into a new tax bracket with a higher tax rate due to this expansion.
In addition, President Obama and the previous Congress enacted the Payroll Tax Holiday. This is a separate issue entirely and it reduces a different item in the taxing structure. The Payroll Tax Holiday reduces the Social Security tax withholding, or the FICA-OASDI tax amount. TRS retirees do not benefit from this Tax Holiday, because TRS does not deduct FICA-OASDI taxes from a retiree’s annuity check.
In 2009 and 2010 there was a “Making Work Pay” credit in effect as part of the American Recovery and Reinvestment Act. This expired on 12/31/2010, meaning that many people will notice an increase in the amount of Federal Withholding deducted.
The combination of the change in the federal withholdings and the expiration of the “Making Work Pay” tax credit are taking a significant bite out of many retirees’ pay checks.
What can be done?
TRTA members can contact their Congressional members and let them know that these tax increases are making a bad situation worse in Texas. Congressional members need to know that TRS retirees have not had a pension increase in 10 years and have already lost as much as 30 percent of their buying power! Any additional reduction has a real and detrimental impact on retirees’ fixed incomes.
Additionally, Congress should find a way to eliminate the Government Pension Offset (GPO) and the Windfall Elimination Provision (WEP) which impact so many TRTA members.
Thank You
We know that TRTA members are already engaged in this very hard state legislative budgeting process. Texas legislators have received more than 15,000 emails from TRTA members! You are doing an excellent job in promoting TRTA’s major budget initiatives: the restoration of funding for the TRS-Care health insurance program and the TRS pension trust fund. We need to protect our health care premiums and find a way to provide retirees with a real benefit increase.
TRTA members are doing a lot to help advance our legislative priorities. The level of activity is increasing all over the state and legislators are responding. Many have contacted TRTA to arrange meetings on the issues important to you. This is great news and we appreciate all you do to make legislators aware that our issues should not be moved to the back burner.
Thank you for your efforts and for your support of the Texas Retired Teachers Association!

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