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Payroll tax cut, what payroll tax cut?

U.S. Senate Majority Whip Sen. Richard Durbin (D-IL) (C) pauses as he answers questions from the media after he met with fellow Senate Democrats on a deal on payroll tax cut that has been struck with the Senate Republicans Dec. 16, 2011 on Capitol Hill in Washington, D.C. Some New Yorkers told Marketplace they don't know what the payroll tax cut is, how much money it put in their pockets, or whether they spent it.

CORRECTION: The original version of this story incorrectly described the size of the payroll tax cut Congress is debating whether to extend. The tax was cut to 4.2 percent from 6.2 percent, a reduction of two percentage points. The text has been corrected.

Kai Ryssdal: The on-again, off-again negotiations over the payroll tax cut that we thought were settled Friday afternoon are now off -- again. The House and Senate are, as of this moment, resolved to disagree over how long it should be extended for. The cut in Social Security taxes last year took that tax down from 6 to just over 4 percent of people's paychecks. If there's no deal, it goes back up come January 1st. But for all the back-and-forth coming from Capitol Hill, do consumers know what the tax cut really is? And if so, what're they're doing with their extra 2 percent? Sally Herships has more.


Sally Herships: This story is not about the 99 percent, it’s about the 2 percentage point cut in the payroll tax. That tax funds Social Security. But has anyone even heard of the tax cut and how much extra money they got? I took a quick poll at New York’s Grand Central Station to find out.

 

Steven Hauck: No, I don’t.


Brent Stephens: No.


Georgia Thornton: I have never heard of it.

When I finally met someone, Nicole Kindred, who knew about the tax cut, it turned out she’s supposed to know about it.

Herships: So have you heard of the payroll tax cut?


Nicole Kindred: Yes.


Herships: You’re the first person I’ve spoken to today.


Kindred: I’m in HR. I’m the head of my company’s HR.


Herships: When you first got your paychecks this year, were you like 'awesome, 2 extra percent'?


Kindred: No, I did not notice.

Once we calculated that Kindred got about a $100 extra a month, she was pretty sure she saved it. Others knew they were spending it not saving it. Like MBA student Loran Cheng.

Loran Cheng: As a student I was probably saving $100 a month; in Austin, that’s a lot. So, that’s like 100 beers, every night.

But Cheng says she bought a lot of books last year. No one was more sure they were spending than Georgia Thornton, a teacher from Miami.

Georgia Thornton: Yes.


Herships: What do you think it went on, your extra $400, $500, $600?


Thornton: Shoes, clothes. Yes, definitely. I was trying to stimulate the economy, local merchants, that’s where I was spending my money.

Exactly what the government would have wanted. In New York, I’m Sally Herships for Marketplace.

About the author

Sally Herships is a regular contributor to Marketplace.
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