You may have already experienced it – your incredibly shrinking paycheck, as Congress did not extend the temporary payroll tax cut.
The Social Security (SS) payroll cuts, which put more money into the general economy in 2011 & 2012, have cost the government about $120 billion, according to The Wall Street Journal – money which could have been used to reduce the deficit.
The temporary payroll tax holiday helped middle-income families take home about an extra $1,000 last year. In 2013, people earning $50,000 annually will pay $1,000 more in payroll taxes. This was one of the givebacks that helped us avoid going over the fiscal cliff.
In 2013, workers will probably face another financial challenge. They will bring home less, but they’ll pay more as food prices are expected to rise, largely thanks to the drought impacting food production in the South and Midwest.
However, some semblance of stability will be restored to the Social Security system due to the reinstatement of the 2 percent payroll tax cut. Despite its popularity, it is highly unlikely that Congress will restore the SS payroll tax holiday this year.
Edward J. Kohlhepp, CFP®, ChFC, CLU, CPC, MSPA
Kohlhepp Investment Advisors, Ltd.
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