On January 3, 2013, Professor Brad Borden was a featured guest on the Morning Show radio broadcast of The Voice of Russia: American Edition. The discussion focused on the fact that the New Year marked an increase in the payroll tax for most Americans despite the fact that Congress averted the Fiscal Cliff.
Borden explained to listeners that the payroll tax increase is really the expiration of a payroll tax “holiday” put into effect a few years ago reducing the Social Security portion of the payroll taxes from 6.2% to 4.2%. Now that Congress failed to renew the tax holiday, the payroll tax has returned to its previous levels affecting most American households (e.g., a household making $50,000 will now be paying an additional $1,000 in taxes each year).
“As the media was focused on the concept of the Fiscal Cliff, the expiration of the payroll tax did not get as much attention,” said Borden. “Some people may have only learned in the past 2-3 weeks that their first 2013 paychecks would be impacted.”
The payroll tax increase will be felt by most low- and middle-income households. “We in America tend to spend up to what we earn, so this increase will have a significant effect on a large portion of the population,” explained Borden. “And any increase in taxes has a significant effect on lower income families, and this increase is certainly going to make it tougher for them to meet their basic needs.”
Listen to the full interview.