WASHINGTON – The fiscal cliff may have been avoided, for now, but most Americans have a bit less take-home pay to spend this year as Uncle Sam is taking a bigger bite.
Two years ago, Congress and the president lowered workers’ social security withholdings to stimulate the economy. The result, most Americans saw what amounted to a 2 percent raise. But that tax break expired at the end of 2012.
“As a result of the ending of the payroll tax holiday, everyone’s paycheck will be reduced by 2 percent,” says Joel Heiserman, with Heiserman and Young Accountants in Bethesda, Md.
Around Washington, many people hadn’t noticed the drop in take-home pay which is estimated to average about $700 a year. Others, like Martin Austermuhle, editor- in-chief of DCist.com, were well aware.
“My employer started covering my health insurance plan 100 percent. So, I assumed I’d be getting more on a monthly basis. I looked at my paycheck last week and I was getting less than I was last year,” Austermuhle says.
The payroll tax does not distinguish between middle and upper class.
“Everyone check is affected as a result of the social security tax,” says Heiserman.
But, that’s no consolation for Austermuhle, who was banking on having more take-home pay this year.
“I’d assumed I had a little extra cash on hand, but certainly not,” Austermuhle says.