If you earn more than $22,900 a year, get ready for a two-part jolt. Starting Tuesday, New Year's Day, your employer will begin taking Social Security taxes out of your paycheck again. And you will be paying more than in 1979.
Although the Social Security tax rate will remain the same, 6.13 percent for both employer and employe, the wage base on which the tax must be paid will increase. It is $22,900 this year; it will be $25,900 in 1980. Because of this, the maximum Social Security tax will rise from $1,403.77 to $1,587.67, an increase of about 13 percent.
But there also is a little good news in store for taxpayers. On the 1979 income taxes due April 15, the familiar personal exemption that goes to every individual covered in every tax return will rise from $750 to $1,000.
Congress did that as part of a tax cut a year ago.
But Congress also knocked out the state and local gasoline tax deduction that used to go to taxpayers who itemized deductions. So they will lose a little.
The higher personal exemptions have already shown up in slightly lower income tax withholding rates in 1979.
The Social Security tax increase will not affect those making less than this year's $22,900 cutoff.
In 1981, however, a further Social Security tax increase is scheduled that will affect all workers. The wage base will go up again, to $29,700. And the rate is also scheduled to rise to 6.65 percent. Many members of Congress are seeking ways to forestall this 1981 increase.
Analysts estimate that the 1980 increase will cost workers an extra $2 billion next year, with employers paying a similar amount. The increase will affect about 9 percent of American wage-earners.
The increase in the personal exemption and repeal of the gasoline tax deduction aren't the only changes in the federal income-tax laws that will affect April's returns.
Congress also has adjusted the tax brackets to offset the impact of inflation on workers' incomes, has increased the "zero bracket amount," previously known as the standard deduction, below which no taxes are owed, and converted some deductions to tax credits.
The Internal Revenue Service said recently that these income tax changes should have most of us pretty well satisfied. The agency boasted that "generally, the average American will pay less taxes in 1979 than he did on the same income in 1978."
The problem with that is that most Americans no longer have the same income they did in 1978; they are making more.
And tax experts estimate that these wage increases have pushed taxpayers into higher brackets to the point of increasing their tax burdens by some $25 billion.
This will happen again in 1980, and Carter administration policymakers concede that, as a result of this phenomenon, the government will have to cut taxes again. But they are pointing to 1981 or later. Mostly for fear of exacerbating inflation, they've decided against a cut for 1980.
Although both Congress and the White House are shying away from a tax cut in 1980, they're conscious of the need to ward off the 1981 Social Security tax increase, if at all possible.
Both sides have suggested that a major part of any tax cut proposed in 1981 should be a rollback of rising Social Security taxes.