FOX19 Investigates: Why the payroll tax cut is ending
Higher income Americans tended to spend more of the payroll tax cut by shopping
CINCINNATI, OH (FOX19) -
Chances are, your paycheck's getting smaller. Pres. Obama
and Republicans in Congress did not include an extension of the payroll tax cut
in their Fiscal Cliff deal last week. So now we're responsible for 6.2% of the
Social Security taxes taken out of our paychecks, rather than 4.2% like it was
for the past couple of years.
That extra 2% adds up to a lot of money. For a person making
$50,000 a year, that's an extra $1,000 they've been able to take home over the
previous 12 months.
It'll be interesting to see if Americans getting less take
home pay affects the economy. A new study
by the Federal Reserve Bank of New York shows that consumers spent 36% of the
extra money they took home when the payroll tax cut was in effect. Higher
income people went shopping. Lower income people paid down their debts.
Speaking of debt, two
professors writing in the New York Times suggest Social Security is shakier
than we've been led to believe. And critics of the payroll tax cut say
extending it this year would've just gotten the country in even more dire