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How much will payroll tax hikes cost you?

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Susan Walsh/AP/File

(Read caption) The US Capitol in Washington. Not only did the 2010 payroll tax cut die at the end of 2012, but high-income workers now owe an extra 0.9 percent, thanks to the Affordable Care Act, Williams writes.

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2013 is a tough year if you owe payroll tax, as most of us do. Not only did the 2010 payroll tax cut die at the end of 2012, but high-income workers now owe an extra 0.9 percent, thanks to the Affordable Care Act. Economists worry about what the combined new taxes will mean for workers’ net pay, consumer spending, and an economy still trying to get its footing. Now the Tax Policy Center’s updated Payroll Tax Calculator shows just what the tax hit means for individual households.

The 2010 tax act cut the workers’ rate for the Social Security payroll tax from 6.2 percent to 4.2 percent for 2011 and 2012. Congress allowed the reduced rate to expire as scheduled at the beginning of this year. The Tax Policy Center has estimated that the higher tax rate will take $115 billion out of workers’ pockets this year and cut consumer spending.

The ACA created a new “additional Medicare tax” that kicked in for the first time in January. Individuals earning more than $200,000 and couples earning more than $250,000 now pay a 0.9 percent tax on earnings above those thresholds. Few of us will pay the new tax, but it will nip at high earners’ wallets.

 

Finally, the cap on earnings subject to the Social Security payroll tax increased from $110,100 to $113,700. 

A few examples illustrate the impact on workers (ignoring changes in income tax withholding):

Try out our new calculator and see how the higher payroll taxes will affect your bottom line.

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