For the past two years, many of us have had a little break in our paychecks. The payroll tax — which helps pay for Social Security — was cut by two percentage points.
The so-called holiday was meant to stimulate the economy. But as lawmakers wrangle over extending income-tax breaks to avoid the fiscal cliff, the payroll-tax holiday seems all but over.
So, should we care? There are two ways to look at it.
Number 1: It’s a big deal:
“We’re talking about over $100 billion in stimulus added to people’s paychecks,” says Jared Bernstein, senior fellow at the Center on Budget and Policy Priorities.
Or, number 2, for a taxpayer making, say, $50,000 a year, it’s a bit more cash.
“That works out to be about $20 a week,” says Joseph Rosenberg, a research associate at the Urban/Brookings Tax Policy Center.
But did it help the economy?
“It certainly didn’t push us back to good times,” says Joe Henchman, vice president for legal projects at the Tax Foundation.
So what happens if we lose it? That depends on the fate of the Bush-era income tax cuts. Rosenberg says if those are extended, “then the impact of the expiration of the payroll tax is not likely to have a significant economic impact.”
But, whatever happens with income taxes, the payroll tax holiday appears over.