Taxes to Go Up for 163 Million Workers
The temporary reduction in Social Security payroll taxes is due to expire at the end of the year and apparently no one in Washington is pushing to have it extended. According to Senator Orin Hatch of Utah “the payroll tax holiday was intended to be temporary and there is strong bipartisan support to let that tax provision expire.”
Social Security is funded by a 12.4 percent tax on wages up to $110,100. Fifty percent is paid by employees and the other half is paid by employers. Self employed workers must contribute the entire tax amount themselves. Congress and President Obama reduced the employee share to 4.2% from 6.2% for 2011 and 2012. The President pushed for the tax cut in hopes that the additional take home pay would result in increased spending and stimulate the economy. A worker making $50,000 per year saw their net pay increase about $19 per week.
The Wall Street Journal recently reported that there is little desire on the part of either party to extend the tax. Politicians from both sides of the aisle are concerned about putting further pressure on social security and they are backed by powerful senior advocates like AARP.
Although there is a possibility that the payroll tax cut could be extended for 2013, experts agree this seems unlikely at this point. The expiration of the tax cut will cost the average employee $1,000 per year and a family with a six figure income as much as $4,500.