Reporting Tim Kephart
MIAMI (CBSMiami) – When you get your paycheck on Friday, you may do a double-take at your new take home pay. Millions of Americans will see their paychecks go down after Congressional leaders allowed the payroll tax cut to expire at the beginning of the year.
Under the bipartisan fiscal cliff bill, the payroll tax cut was allowed to expire. President Barack Obama had originally asked for the payroll tax cut to be extended, but Congressional Republicans opposed the measure which served as a fiscal stimulus.
“We all have less net imcome, so you stay home, you cook more, you go out less and it effects the economy all the way around,” said Estrella Nalda of Doral.
The payroll tax cut was originally put in place two years ago during the height of the Great Recession. The tax, which helps fund Social Security, was set at 4.2 percent for the last two years.
As of January 1, the tax reverted back to its old rate of 6.2 percent on the first $113,700 in wages. For workers earning $50,000 a year, taxes will rise by around $1,000. For a worker earning $110,100, the increase will be around $2,200, according to the Wall Street Journal.
“This was the end of the tax holiday that they declared about two years ago which put a little bit more money in people’s pockets and juiced spending with a little bit more money,” said financial adviser Lane Jones.
Businesses have allowed salaries to remain stagnant over the past few years and have not indicated they will begin to invest the trillions of dollars on the economic sidelines into higher wages as tax rates increase.
In addition, health care costs have also gone up in 2013 due to higher costs for patient care giving paychecks a double-whammy to start the year.
To see how your paycheck will be affected, click here.