That just might be this year’s million dollar question.
Many taxpayers, particularly those in the middle class, breathed a brief sigh of relief when Congress passed legislation to keep their income taxes from rising. What they may not have realized, however, is that workers will have to pay at least two percent more in Social Security taxes, meaning the country’s 160 million workers will see smaller paychecks. Households that earn $50,000 will pay an extra $1,000 in taxes for 2013. Individuals earning the maximum 2013 cap of $113,700 or more will pay $2,274, or nearly $200 per month.
In 2011, the government temporarily lowered the payroll tax rate to 4.2% from 6.2%. This tax cut was made with the thought that taxpayers would have more cash in their pockets which (they hoped) would provide a boost to the economy. This tax cut has expired and an additional payroll tax rate decrease is not expected. A decrease in payroll taxes, which are used to fund Social Security, costs about $120 billion annually and the Treasury Department has made up for the difference with money from general funds.