What Does The Payroll Tax Cut Mean For Young Americans?
This week, leaders in the House and Senate are debating whether to extend the payroll tax cut for workers in 2012. If Congress doesn’t vote in favor of extending the tax cut, employees will begin paying a 6.2 percent tax on their wages in January, up from 4.2 percent this year.
So, what does that mean for young Americans? A lot. 45 million young workers pay payroll taxes, and could get significantly less earnings in their paycheck if the tax break is not extended.
In 2011, Congress temporarily reduced the Social Security payroll tax from 6.2% to 4.2%, to get the economy growing again by putting more money in Americans’ pockets. So, if someone made $30,000 in 2010, she paid $1,860 in payroll taxes. But in 2011, with the 2% tax cut, she paid $1,260 in payroll taxes and had an extra $600 to put in the local economy.
Leaders from both parties have said they agree the tax cut should be extended, but remain divided over how to pay for it, and whether to include other policy provisions in a legislative package. To offset the payroll tax cut and not add to the deficit, Senate Democrats are proposing a 3.25% tax on people who earn over $1 million. On the other hand, Congressional Republicans want to offset the tax cut with reduced spending elsewhere, and have included controversial provisions like requiring the President to move forward with an oil pipeline.
Votes are expected this week as Congress negotiates the 2012 budget, and much is at stake for young workers. If the extension doesn’t pass, 45 million working Americans under 30 would see their payroll taxes go up in 2012.
To find out more on the payroll tax cut, click here.
This article was originally published by Young Invincibles. It is reprinted here with permission.