Wall Street Journal (12/29/12) Sudeep Reddy
Payroll taxes are expected to increase starting on Jan. 1, no matter how the negotiations to avoid the fiscal cliff turn out. The idea of extending the tax break beyond Dec. 31 has dropped out of year-end negotiations between the White House and Congress, and as a result, U.S. workers across the income spectrum will likely see the Social Security payroll tax revert to 6.2% from 4.2%. For a typical American family earning $50,000 a year, that would mean $1,000 in additional taxes over the course of the year.
A cut to take-home pay would be certain to weigh on economic growth next year. The forecasting firm IHS Global Insight estimates the payroll tax’s value at about $113 billion a year, approximately 0.7% of annual U.S. economic output. A return to the 6.2% rate would trim the nation’s growth rate by about half a percentage point next year, IHS Global Insight says. Few lawmakers have discussed the measure in recent months, focusing instead on the larger battle over individual income tax rates.
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