S&P 500 Dividends: The Futures Flatline... Again

The stock market's forward looking economic prediction for the next six to nine months of 2012, in one picture:

Expected Future Trailing Year Dividends per Share for the S&P 500, as of 9 January 2012

Commentary from today's picture:

Between 9 December 2011 and 9 January 2011, the expected future for S&P 500 dividend payments have essentially "flatlined". This repeats the year-end pattern we saw in 2010.

In early 2011, the U.S. economy slowed down into what we describe as a "microrecession", characterized by very low economic growth rates, which lasted through 2011Q3.

The U.S. didn't leave those economic doldrums until the fourth quarter of 2011.

Is this a signal that forward looking investors believe the U.S. economy is about to repeat that performance?

Your Paycheck in 2012

How much money will you really take home from your paycheck in 2012?

To find out, we've created the tool below so you can run the numbers that matter the most for you! In addition to finding out how much money Uncle Sam will be taking straight out of your paycheck for income tax withholding and FICA (which we've broken down into your Social Security and Medicare tax components), our tool will also work in your 401(k) or 403(b) retirement plan contributions, as well as the effect of any flexible spending account arrangements you may have set up through your employer.

Better yet, our tool will also let you see how you take home pay might change if you earn a raise during the year!

Just enter the indicated data into our tool, and we'll run your numbers for 2012, or at least your numbers through February 2012, depending upon what happens with that temporary Social Security payroll tax cut. If and when that changes, we'll post a new version of the tool!

Your Paycheck and Tax Withholding Data
Category Input Data Values
Basic Pay Data Current Annual Pay
Pay Period
Federal Withholding Data Filing Status
Number of Withholding Allowances
401(k) or 403(b) Contributions Pre-Tax Contributions (%)
After Tax Contributions (%)
Flexible Spending Account Annual Contribution Data Health Care Spending Account
Dependent Care Spending Account
What if You Had a Raise? Desired Raise (%)

Your Paycheck Data
Category Calculated Results Values
Basic Income Data Proposed Annual Salary (Including Raise!)
Typical Paycheck Amount
Federal Tax Withholding Amounts U.S. Federal Income Taxes
U.S. Social Security Taxes
U.S. Medicare Taxes
401(k) or 403(b) Contributions Pre-Tax Contributions
After-Tax Contributions
Total Contributions
Flexible Spending Account Contributions Health Care Spending Account
Dependent Care Spending Account
Take Home Pay Estimate Net Paycheck Amount

That's all well and good, but how does your paycheck compare to what it would have looked like in 2010, the last year before the Social Security payroll tax cut? And for that matter, when both Single and Married tax filers had lower federal income tax withholding rates in place as well? Did you really get the benefit of that full 2.0% reduction of your income more in your pocket? Our results table below shows how you take-home pay would have been....

Compared to 2010
Category Calculated Results Values
Major Changes Payroll Tax Cut "Savings" per Paycheck (*)
Change in Income Taxes Withheld per Paycheck
Net Gain (+) or Loss (-) to You per Paycheck
Your Personal "Stimulus" (Percentage of Income)

(*) As part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010, the taxes collected from all Americans with wage or salary income to support Social Security was reduced by 2.0%, from 6.2% to 4.2%. This change only affects what individuals see on their paychecks, as the employers' portion of these taxes will remain at 6.2% of their employees' wage or salary incomes.

To make up any resulting shortfall in the Social Security tax collections used to pay benefits to today's Social Security recipients, the U.S. Treasury will increase its borrowing to cover the cost of providing those benefits at their current level. The Social Security payroll tax cut was extended for most wage and salary earners through February 2012 by the Temporary Payroll Tax Cut Continuation Act of 2011.

As for why President Obama's promise of a 2.0% payroll tax cut really doesn't add up to 2.0% of your salary or wage income, see the charts here (if you file as Single) and here (if you file as Married), for the explanation of those tax withholding dynamics....

And remember, one of the consequences of not putting that extra 2.0% of your paycheck into Social Security is that the program will run more deeply in the red, which will force the government to have to borrow more money just to pay benefits to today's Social Security recipients.

Our advice: if you'd like to put Social Security on a more sound footing, and keep your take-home pay from being reduced by 2.0% when the temporary Social Security payroll tax cut is set to expire in February 2012, have your U.S. Representative or Senators reduce all the other income tax rates (and withholding tax rates) by 2.0% (or more). As far as President Obama is concerned, it will make no difference to how much money the federal government will borrow on his watch.

Previously on Political Calculations

We've been in the business of calculating people's paychecks (not including state income tax withholding) since 2005!

But before we forget, your employer pays a lot more to keep you on the payroll than just your paycheck! The tool below shows how much it costs to employ you in 2011-12!

Meet the Married Rich of 2012!

We're following up our look at the payroll and income tax withholding plight of Single tax filers today with a look at the plight of those who have their income taxes withheld at the IRS' initial 2012 married tax rates:

Federal Income Tax Withholding Rates for Married Filers, 2010 vs 2012

Once again, we're comparing the initial tax withholding rates for 2012 against those that applied in 2010, the last year before the employee's portion of the Social Security FICA payroll taxes of 6.2% of the employee's income was "temporarily" reduced to 4.2%.

What we find is that the benefits of extending the Social Security payroll tax cut into 2012 is limited to roughly 51% of those who might choose the Married filing status for their federal tax withholding, namely those whose incomes might fall between $7,900 and $78,800.

For all practical purposes, no individual who has their taxes withheld under the Married filing status whose income equals or exceeds $78,800 can expect to see any meaningful increase in their take-home pay with respect to what they might have done under the tax withholding rules of 2010. The increase in the income tax withholding rates will offset the reduction in they might otherwise see from the payroll tax cut.

In the chart above, we've used two different shading levels to indicate the range of incomes for which the 2.0% income surtax incorporated into the December 2011 temporary payroll tax cut extension might apply.

The lighter gray zone indicates the incomes where a married individual's income may be affected by the surtax while the darker gray zone indicates the incomes where a married couple will definitely be exposed to the surtax (since married filers combine the incomes of two people, it's possible for their combined income to be above the $110,100 level, yet still not be individually subject to the new 2.0% surtax.)

All in all, we're not sure it's worth forcing Social Security to run more deeply in the red for the sake putting a smidgen more take-home money into just 51-53% of American income earners' paychecks. It would benefit way more people, and put way more disposable income into the economy, if the federal government would let the temporary Social Security payroll tax cut expire and cut regular income and withholding tax rates across the board by 2-3% instead.

But if nothing else, at least we now know that President Obama's definition of who is "rich" really starts at $37,500 for single tax filers and $78,800 for married tax filers.


Internal Revenue Service. Payroll Tax Cut Temporarily Extended into 2012. IRS-2011-124. 23 December 2011.

Internal Revenue Service. Early Release Copies of the 2010 Percentage Method Tables for Income Withholding. Notice 1036. Released December 2011.

Internal Revenue Service. Early Release Copies of the 2010 Percentage Method Withholding and Advance Earned Income Credit Payment Tables. Notice 1036. Released November 2009.

Internal Revenue Service - Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2 - All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items: Size of Adjusted Gross Income and Marital Status. [Excel Spreadsheet]. Accessed 2 January 2012.

Meet the Rich of 2012

Two days before Christmas 2011, the U.S. Congress acted to pass a temporary extension of the Social Security payroll tax cut that had originally been passed a year earlier, and which had been set to expire at the end of 2011. To celebrate the occasion, the White House issued the following statement describing who would benefit from extending the Social Security payroll tax cut:

President Obama today signed into law a two month extension of the payroll tax cut, which means that 160 million American workers will not see their paychecks shrink starting Jan 1, 2012. The President thanked Congress for ending the stalemate and urged them to keep working to reach an agreement that extends this tax cut as well as unemployment insurance through all of 2012, saying it is the right thing to do for American families and for the economy, and called it "a boost that we very much need right now."

While technically true, we find that the White House's statement is misleading.

The part that's true is that had the Social Security payroll tax cut that had originally passed into law as part of the Job Creation Act of 2010, as many as 160 million individuals would indeed have seen their paychecks shrink as the Social Security payroll tax would have risen back to the level it was in 2010.

The only problem is that just over half of those wage and salary earning individuals ever saw any benefit from the Social Security payroll tax cut on their paychecks in the first place!

We'll illustrate why that was the case with the following chart, which presents the withholding income tax rates for individuals having money withheld at the "Single" tax filing status rates throughout the year for both 2010 and 2012.

U.S. Federal Income Tax Withholding Rates for Single Filers, 2010 vs 2012

The 2012 withholding tax rates shown in the chart above are nearly identical to those for 2011 - the only difference is that the incomes at which the withholding tax rates apply for 2012 have been adjusted upward slightly from 2011's levels to account for the effect of inflation over the past year.

What we find is that for all practical purposes, the only individuals who really benefitted from the payroll tax cut of 2010 were individuals with incomes between $6,050 and $37,500.

Assuming that the income distribution given by the IRS' adjusted gross income data for single tax filers from 2009 is representative of today's single tax filers, we estimate that roughly 53% of the wage and salary earners who have their taxes withheld at the Single filing status will see any significant benefit on their paychecks from the extension of the Social Security payroll tax cut. At least, as compared to what their paychecks would have looked like for earning the identical incomes in 2010, before the temporary Social Security payroll tax cut was enacted.

Much of the same math applied for 2011, which is a major reason why there was so little economic "stimulus" from the payroll tax cut - instead of having more money to take home, a very large percentage of individuals took home less money after all tax withholding from their paychecks than they would have in 2010.

And for all practical purposes in 2012, almost all individuals with incomes above $37,500 will see the federal government's withholding and payroll taxes claim a larger share of their paychecks than they would have seen in 2010. With almost exactly the same economic benefit from the "stimulative" effect desired by President Obama.

But at least now the pain of higher federal taxes taking more money out of every paycheck is being spread among all those single tax filers with incomes above $37,500.

Meet the rich of 2012!


Internal Revenue Service. Payroll Tax Cut Temporarily Extended into 2012. IRS-2011-124. 23 December 2011.

Internal Revenue Service - Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2 - All Returns: Adjusted Gross Income, Exemptions, Deductions, and Tax Items: Size of Adjusted Gross Income and Marital Status. [Excel Spreadsheet]. Accessed 2 January 2012.

White House. President Obama: Extending Payroll Tax Cut Is a "Boost We Need Right Now". 23 December 2011.

Median Adjusted Gross Incomes by Tax Filling Status

Sometimes, as we work on our various projects, we stumble across data that's kind of interesting in and of itself.

To that end, today's example of that would appear to provide more evidence that social factors have more to do with the perceived rise in income inequality in the United States over time than do economic factors:

Median Adjusted Gross Incomes by 2009 Tax Filing Status

In the chart above, we've presented the median adjusted gross incomes we've estimated for 2009's income tax filers according to their tax filing status. The number in parentheses below each column in the chart indicates the number of tax returns filed in 2009 for each group.

It would seem that just marital status has a lot to do with the observed differences between the various kinds of income tax filers.

Data Source

U.S. Internal Revenue Service Statistics of Income Division. 2009 Individual Complete Report (Publication 1304), Table 1.2. [Excel Spreadsheet]. Accessed 2 January 2012.

Solving the Biggest Civil Rights Crisis of 2012

Welcome to 2012! We're kicking off the new year by solving the biggest civil rights crisis in America today, at least according to the United States Department of Justice: the racial disparity in the percentage of individuals without current photo identification needed for voting in South Carolina!

The editorialists of the Wall Street Journal were a bit taken aback by the apparent priorities of the U.S. DOJ:

Eric Holder must be amazed that President Obama was elected and he could become Attorney General. That's a fair inference after the Attorney General last Friday blocked South Carolina's voter ID law on grounds that it would hurt minorities. What a political abuse of law.

In a letter to South Carolina's government, Assistant Attorney General for Civil Rights Thomas Perez called the state law—which would require voters to present one of five forms of photo ID at the polls—a violation of Section 5 of the 1965 Voting Rights Act. Overall, he noted, 8.4% of the state's registered white voters lack current photo ID, compared to 10% of nonwhite voters.

This is the yawning chasm the Justice Department is now using to justify the unprecedented federal intrusion into state election law, and the first denial of a "pre-clearance" Voting Rights request since 1994.

According to the 2010 U.S. Census, 66.2% of South Carolina's 4,625,364 entire population were racially classified as being "White alone", while 27.9% were racially classified as being "Black or African American alone", who make up the lion's share of the state's "non-white" population. We will assume these percentages hold for the state's voting age population, which would put the number of individuals Age 18 or older at 3,544,890.

2010 U.S. Census - South Carolina population and racial demographics

Simple multiplication then tells us that there are approximately 2,346,717 "whites" and 989,024 "blacks" of voting age in South Carolina.

Using Assistant Attorney General Thomas Perez' figures, we can now estimate the number of each racial subset of South Carolina's voting population that he claims lacks current photo identification. For whites, that works out to be 201,818 individuals, while for blacks, the number estimated to not have current photo identification is 98,902, bringing the combined total of current photo-ID-less potential voters to 300,720.

These figures assume that 100% of the state's voting age population is registered to vote. In reality, an estimated 65.6% of South Carolina's voting age population actually voted in the 2008 election, which suggests that the actual number of registered voters in the state who might be affected by not having a current photo ID will be nearly one-third smaller than our figures suggest. We'll assume the 100% figure for our remaining calculations however, because they would represent a worst-case scenario.

Using those larger numbers then, all it would take to make the percentage of blacks without current photo IDs be equal to the percentage of whites without current photo IDs to achieve Assistant Attorney General Thomas Perez' vision of perfect racial equality is for 13,846 blacks to take the simple action of renewing the photo IDs they have previously been issued by the state of South Carolina, and which have since expired.

After all, common sense tells us that individuals who have previously been able to obtain valid state-issued photo identification should have a pretty simple time doing so again. Apparently, the state's Department of Motor Vehicles will even pick you up and drive you to their office for the sake of getting you a valid and current photo ID to support your desire to vote in the last days to register ahead of an election!

Going back to the numbers, South Carolina's Department of Elections reports that 240,000 state voters lacked current ID cards as of October 2011. The state's Department of Motor Vehicles has indicated that 200,000 of those represent a combination of individuals whose existing photo IDs have expired (most often), or who have moved to other states, or who have passed away.

For those who haven't moved to other states or died, perhaps the easiest solution for obtaining a current photo ID would be to follow the directions provided by South Carolina's Department of Motor Vehicles for renewing their expired driver's license to make them current.

And to help "nudge" them in the right direction, we would recommend that Assistant Attorney General Thomas Perez take steps to prevent these particular individuals from doing things like boarding aircraft, buying alcohol, tobacco or firearms, depositing a check at a bank, applying for a loan, or voting in a union election, to name just a few ways the government might use its power to compel such people to eliminate the specific racial disparity of which he is so concerned.

At least then, perhaps Assistant Attorney General Thomas Perez will feel like he is achieving something meaningful in his career!

Data Sources and References

U.S. Census Bureau. 2010 Census Data. Accessed 2 January 2012.

File, Thom and Crissey, Sarah. Voting and Registration in the Election of November 2008. Current Population Reports. U.S. Census Bureau. May 2010.

Howden, Lindsay M. and Meyer, Julie A. Age and Sex Composition: 2010. 2010 Census Briefs. May 2011.

Wall Street Journal. Holder's Racial Politics. 30 December 2011.

Best Albums of 2011

It may have been a bad movie year, but the music industry did not disappoint. I actually had a hard time narrowing down this list to fifteen. There are certainly others that were in the running, others that didn't make the list because of one track or another--it was that hard. Here it is:
  1. Tom Waits: Bad As Me
  2. Bon Iver: Bon Iver
  3. Wilco: The Whole Love
  4. Black Keys: El Camino
  5. The Civil Wars: Barton Hollow
  6. Trampled by Turtles: Palomino
  7. The Roots: Undun
  8. Glenn Campbell: Ghost on the Canvas
  9. Foo Fighters: Wasting Light
  10. HARDTOBREATHE: The Reckoning
  11. Bush: Sea of Memories
  12. Miranda Lambert: Four the Record
  13. Lucinda Williams: Blessed
  14. Matt Nathanson: Modern Love
  15. Christina Perri: Lovestrong
Narrowing it down to fifteen may have been difficult, but picking the number one album of 2011 was incredibly easy. After listening to one track of Tom Waits' seventeenth studio album, I was sold. If you haven't listened to it, go. Now! It's that good.

It was a great year for upstarts (Christina Perri and The Civil Wars) and artists that have been around for what seems like ages (Lucinda Williams, Tom Waits and the incomparable Glenn Campbell). And that I can only think of two disappointments (return of the Red Hot Chili Peppers and Ryan Adams' Ashes & Fire) is saying something. The music industry better get cracking because 2011 is going to be hard to beat.