Tax increase not just for the rich, Social Security Payroll Tax increases by 2%

CLEVELAND - The fiscal cliff bill raises taxes on incomes by 39.6 percent on individuals earning $400,000 a year or $450,000 a year for couples. According to President Obama, that's the wealthiest 2 percent of Americans.

According to the Associated Press, many average American workers will also be paying more in taxes. There will be a 2-percent increase in the Social Security Payroll Tax. The money will be taken right from your payroll check.

Two years ago, there was a tax cut so workers would pay less to Social Security, but on Jan. 1, 2013 that tax cut expired and Congress agreed not to make it part of fiscal cliff negotiations.

The package passed Tuesday by the Senate and House extends most the Bush-era tax cuts for individuals making less than $400,000 and married couples making less than $450,000.

Obama said the deal "protects 98 percent of Americans and 97 percent of small business owners from a middle-class tax hike. While neither Democrats nor Republicans got everything they wanted, this agreement is the right thing to do for our country."

The income threshold covers more than 99 percent of all households, exceeding Obama's claim, according to the Tax Policy Center. However, the increase in payroll taxes will hit nearly every wage earner.

Social Security is financed by a 12.4 percent tax on wages up to $113,700, with employers paying half and workers paying the other half. Obama and Congress reduced the share paid by workers from 6.2 percent to 4.2 percent for 2011 and 2012, saving a typical family about $1,000 a year.

Here's how it affects you: if you earn $50,000 a year, you will pay $1,000 in taxes this year. It will come right out of your paycheck. That comes out to a little more than $19 dollars cut in your paycheck every week.

Florida AAA says gas prices could go up too because of the fiscal cliff plan. Why? Because we have a plan in place to avoid a fiscal cliff there's more optimism about the economy. If a deal didn't pass, gas prices would have stayed the same or gone down because there would be less optimism about our economic future.

Print this article Back to Top

Comments
IRS says tax season opens January 30 for 1040 filers IRS says tax season opens January 30 for 1040 filers

The IRS will begin accepting tax returns on Jan. 30 after updating forms and completing programming and testing of its processing systems.

Fiscal cliff: New tax law packed with breaks for businesses Fiscal cliff: New tax law packed with breaks for businesses

Tucked into the "fiscal cliff" tax package approved by Congress are billions of dollars in tax breaks that should make the new year a lot happier for businesses of many stripes, including film producers, race track owners and the makers of electric motorcycles.

Big problems are on the way after the fiscal cliff Big problems are on the way after the fiscal cliff

The "fiscal cliff" compromise on taxes leaves a big part of the nation's budget crisis still dangling.

Tax increase not just for the rich, Social Security Payroll Tax increases by 2% Tax increase not just for the rich, Social Security Payroll Tax increases by 2%

The tax increases because of the fiscal cliff bill are not just for the rich, Social Security Payroll Tax increases by 2 percent.

House passes fiscal cliff legislation; check out how Ohio lawmakers voted House passes fiscal cliff legislation; check out how Ohio lawmakers voted

Congress sent President Barack Obama legislation to avoid the economy-threatening "fiscal cliff" of middle-class tax increases and across-the-board spending cuts late Tuesday night.

House of Representatives passes bill to avoid fiscal cliff 257 to 167 House of Representatives passes bill to avoid fiscal cliff 257 to 167

Past its own New Year's deadline, a weary Congress sent President Barack Obama legislation to avoid a national "fiscal cliff" of middle class tax increases and spending cuts late Tuesday night.

House Republicans abandon demands for changes in Senate House Republicans abandon demands for changes in Senate's fiscal cliff bill, vote expected Tuesday

Maneuvered into a political corner, House Republicans abandoned demands for changes in emergency legislation to prevent widespread tax increases and painful across-the-board spending cuts and cleared the way for a final, climactic New Year's night vote.

'Fiscal cliff' bill to House, but doubts on spending cuts

The Senate-approved compromise to avert the "fiscal cliff" ran headlong into opposition from the No. 2 House Republican and other GOP lawmakers Tuesday, raising questions about how Congress might be able to give final approval.

Over the fiscal cliff: Soft or hard landing? Over the fiscal cliff: Soft or hard landing?

A look at why it's so hard for Republicans and Democrats to compromise on urgent matters of taxes and spending, and what happens if they fail.

Bill to avert fiscal cliff heads to House Bill to avert fiscal cliff heads to House

Legislation to negate a fiscal cliff of across-the-board tax increases and sweeping spending cuts to the Pentagon and other government agencies is headed to the GOP-dominated House after bipartisan, middle-of-the-night approval in the Senate.