Both President Obama and Governor Romney have been extremely outspoken about several topics throughout the three presidential debates but with Election Day drawing near, there is one issue that they have yet to discuss: the end of the Payroll Tax Holiday.
In 2010, Mr. Obama enacted a Payroll Tax Holiday that decreased the amount of Social Security taxes workers owed every paycheck from 6.2 percent to 4.2 percent. For a person making about $50,000 a year, this meant they were saving roughly $1,000 a year, or $19 a week. This may seem like a small amount, but the benefit of the payroll tax holiday is that, unlike most tax breaks that require the person to complete a tax return in order to realize the benefit, this one put a little bit of extra money in people’s pockets each pay day.
This payroll tax break was intended to be temporary; to help stimulate the economy, but after two years it does not seem to have done as much good as it intended. Several advocates for seniors, including AARP, are in favor of ending the payroll tax holiday due to the long-term effects it may have on Social Security. They also state that there is not a lot of evidence that the payroll tax break helped improve the state of the economy.
The opposing side states that the possibility of the payroll tax holiday ending, the Bush-era tax breaks ending, and the increase of taxes in other areas (income tax brackets, marriage penalties, etc.) will be too overwhelming for the average American family. They fear that this increase may not allow families time to bounce back and recover.
What are your thoughts on this issue? Are you in favor of ending or extending the payroll tax holiday? Tell us why in the comments section below!
Please check back this week to see a list of the known payroll tax increases/decreases that will occur beginning January 2013. Also, we will be providing some cost-cutting tips for your business as well as for your employees to alleviate the payroll tax changes that will be made next year.