Nearly half — 48 percent — of American workers haven’t noticed that more money is being taken out of their paychecks for the payroll tax that funds Social Security, according to a survey released today by Bankrate.com.
In the previous two years, workers’ paid 4.2 percent of wages (on income of up to $113,700 this year) instead of 6.2 percent. But during last year’s tax negotiations to avoid the fiscal cliff, the payroll tax holiday wasn’t extended. Many predicted at the time that low-income workers would be the most hurt by the payroll tax going up 2 percentage points.
But Bankrate’s survey found that the lowest-income workers not only didn’t notice the tax increase but also were least likely to cut spending to make up for lighter paychecks. It’s likely a 2 percent difference in a small paycheck isn’t significant enough to notice.
But those most likely to cut spending to make up for the return of the higher payroll tax are households earning $50,000 to $75,000. For them, the impact of the payroll tax increase is $1,000 to $1,500 a year.
At the same time, Bankrate noted that its Financial Security Index for March was the highest since December 2010, when Bankrate started tracking how consumers felt about their financial situation. Bankrate said new stock market highs and continued job growth has boosted consumers’ feelings of security.
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