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The Expiring Payroll Tax Holiday

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In 2008, many people received a stimulus check of a few hundred dollars. In 2011, many people got a payroll tax holiday instead of a check in the mail. There wasn’t a lot of news made about the payroll tax holiday but it’s almost as big of a “stimulus check” as the first stimulus check.

Surprisingly, based on how it was structured, the more you made, the more of a holiday you got because it was based on a percentage of your payroll taxes. When the “deficit supercommittee” failed to reach an agreement yesterday, that payroll tax holiday was put in jeopardy. You see, it’s set to expire at the end of the year and people expected the supercommittee to address that. As it stands, they’ve addressed… well, nothing. :)

Why is this a big deal? With the payroll tax holiday, everyone’s paycheck just got a little bit bigger – an average of $934. When you get a check for $300 – $1200, it’s easier for you to decide whether to spend it or save it. When you get $934 trickling in your paycheck over the course of the year, there’s no decision to make. Your paycheck is just a little larger and so you’re more likely to spend it because you don’t get the opportunity to look at a large sum and say – “Hmmm, I want to save this.”

In essence, it’s a better stimulus than a single check because people aren’t put to a decision as to what they’re going to do. A little extra money means their wallet is fatter, their account balance is larger, and maybe they aren’t as frugal as they would be if that balance were smaller.

Unless something is done to address it, it’ll end after this year.

{ 6 comments, please add your thoughts now! }

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6 Responses to “The Expiring Payroll Tax Holiday”

  1. Brad M says:

    I may be the minority, but I hope it expires. I liked the increase in pay for 2011, but why in the world would the Government want to collect LESS money for social security, a program that is in dire straits to begin with?

    • govenar says:

      Maybe the theory is that if the economy is stimulated enough that lots of jobs are created, that’s more people who will be paying into social security, so overall it won’t hurt social security.

      • saladdin says:

        Can we go ahead and say it didn’t work and kill the idea that only a tax cut can generate positive GNP?

  2. Anonymous says:

    Why would somebody want to collect LESS money for Social Security? Good question! I think they want to undermine Social Security anyway they can! So, if (for the time being) they can’t get at it directly, they will cut the payroll tax to weaken it. Then, when it is really in trouble, they will privatize it. A big win for Wall St. and a big loss for most of the rest of us.

  3. Tabby says:

    I made off like a bandit for last year’s taxes after my home purchase, and other deductions. I guess the government was too busy fighting over whether pizza was a vegetable or not to address this though. LOL

  4. PenguinEngineer says:

    Here’s an idea- why don’t you let me decide how best to spend my money and eliminate this tax altogether? I already give hundreds of dollars a month to my mother to support her on top of my own bills- you assholes keep YOUR hands out of MY pockets.


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