December 12th, 2011|
Yet another polarizing debate over the economy, entitlements, taxes, and debts is underway. In the next few days, Congress will make a decision about the payroll tax, which goes toward Social Security, according to The Birmingham News.
The payroll tax was trimmed from 6.2 percent to 4.2 percent for 2011 as a temporary way to boost the economy. For the average household living on $50,000 a year, the cut meant an extra $1,000.
Next year the after-tax income will either go down, stay the same, or go up.
The first option of letting the payroll tax cut expire and shrinking take-home pay appears unlikely. Both Republicans and Democrats generally seem to favor avoiding a tax increase.
In the second option of extending the existing cut for another year, taxpayers would see no change.
The third option is cutting the tax even more so that workers pay only 3.1 percent. The cut would let the average household keep an extra $1,550 a year.
“Most immediately, we need to extend a payroll tax cut that’s set to expire at the end of this month,” Obama said last week. “If we don’t do that, 160 million Americans will see their taxes go up, and it would badly weaken our recovery.”
In Wednesday’s blog, we will discuss the pros and cons of these three payroll tax options and how they affect Social Security. Join us!