The payroll tax affects 159 million Americans, who’ve been benefiting from a temporary payroll tax cut that reduced the tax on their wages from 6.2 percent to 4.2 percent. As the New York Times’ Annie Lowrey reports today, it’s highly likely that this tax cut will expire Jan. 1, regardless of who’s elected president.
A hike on payroll tax, which funds Social Security, would affect both middle- and upper-income Americans, as the Tax Policy Center’s data shows:
But the average benefit of the tax cut doesn’t increase substantially with income: Households with incomes between $100,000-$200,000 benefit an average of $2,050 from the payroll tax cut, the Tax Policy Center calculates, while those with incomes of more than $1 million receive just a $2,711 average benefit, as most of millionaires’ income doesn’t usually come from payroll wages.
That’s why both parties have billed the payroll tax cut as helping the middle-class — who will be the households hit the hardest if and when payroll taxes go up again.