WASHINGTON--President Obama is in New Hampshire on Tuesday to put pressure on Republicans in Congress to extend and expand payroll tax cuts. Everyone who gets a paycheck got to keep more of their own money in 2011 due to payroll tax cuts Obama pushed through. Those breaks expire at the end of December. Obama has proposed continuing the paycheck tax cuts and giving a break to employers who have to pay taxes for each employee.
Figure out how much you will save: http://www.whitehouse.gov/economy/jobsact/calculator
The Obama team could have done a better job this past year of letting people know about their larger paychecks.
My column on how the payroll tax cut speeds cash to workers is HERE.
Anyone who gets a regular paycheck will see deductions on a paystub for Social Security. This year, the amount of the deduction--also called withholding-has been reduced.
The Social Security payroll tax is 6.2 percent for workers and companies. Under a measure Congress approved in 2010--effective this year, 2011-- that rate dropped to 4.2 percent for workers and no break for firms. That break was to last only one year.
What does this mean to you? If you make $106,800 a year, the maximum saving is $2,136. (Social Security taxes are applied to only the first $106,800 of earnings.)
Let's look at it another way: If you make $500 a week, you get a $10 weekly tax cut. If you make $1,000 each week, your break is $20; a $1,500 weekly salary earner pays $30 less in payroll taxes.
What's new: Obama is proposing that workers pay only 3.1 percent in extending the break for another year.
For someone earning $106,800 or more -- (taxes on Social Security are capped on the first $106,800 in wages), the savings would be about $3,300 a year.
If you make $1,000 a week, you paid $62 dollars a week for Social Security in 2010, $42 weekly in 2011 and you would pay $31 in 2012.
Obama is asking Congress to allow companies to pay half the tax -- 3.1 percent on the first $5 million in payroll, a feature intended to especially help small firms. Employers would further save money if they hired new workers or gave raises because under Obama's plan, they would not have to pay any payroll taxes for them. This provision would be capped at a $50 million payroll.