A two-year-old payroll tax holiday expired in the fiscal cliff deal Congress make with President Barack Obama last week, resulting in tax hikes for middle-income families averaging $2,000 during 2013. This was despite President Obama’s “#My2K” social media campaign, waged to prevent such a tax increase on middle-class workers.
“Tell members of Congress what a $2,000 tax hike would mean to you,” the president said in November. “Call your members of Congress. Write them an email. Post it on their Facebook walls.”
Employees’ portions of federal payroll taxes will increase from 4.2 percent to 6.2 percent on their first $113,700 of taxable income, in order to fund Social Security. The income cutoff for the payroll tax in 2012 was $110,100.
The biggest hit will affect individual workers who earn at least that much. Their take-home pay in 2013 will be $2,425 less than last year — and twice as much for high-income married couples.
“This means that if your annual wages are $100,000,” explained accountant Rusty Helms of the Indianapolis firm J.R. Helms & Associates, ”you will see $2,000 less in your net pay than in 2012. … [A] family with both parents working and earning less than a combined $250,000 could see a decrease in available spending money of $4,850 from this change alone.”
NPR correspondent John Ystdie said Jan. 1 that “on average, workers will get around $960 less in take-home pay because the payroll tax holiday hasn’t been extended.”
President Obama did not mention the restoration of older — higher — payroll tax rates when he hailed the fiscal cliff deal before resuming his vacation in Hawaii.
“I want to thank all the leaders of the House and Senate,” Obama said. “Under this law, more than 98 percent of Americans and 97 percent of small businesses will not see their income taxes go up.”
But a Tax Policy Center report found that 77 percent of American households will see an increase in their federal tax burden after higher payroll taxes are factored in.
The result of this renewed tax has economists concerned about a possible economic contraction as workers have less take home pay.
“It would pull money out of peoples’ wallets, and for a lot of folks, that really matters,” Tax Policy Center senior fellow Roberton Williams told CNN.
The #My2K hashtag appeared on Twitter in late November.
The White House website featured many Americans’ personal tweets. “#My2k is keeping this house and keeping it warm for my growing family this winter”; “My2k … means food on table, co-pays at the Drs office, gas in the car & our kids extra activities”; and “#My2k means I won’t have to choose between life-saving meds or food.”
Obama’s most recent tweets focused on the fiscal cliff deal: “This law is just one step in the broader effort to strengthen our economy and broaden opportunity for everybody.”
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