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Payroll tax netting more for government

Payroll taxes usually don't raise as much money as income taxes, but job losses and the sinking housing market are changing that. Brett Neely reports.

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Bill Radke: A lot of us have had our pay limited lately thanks to the recession. That’s probably going to show up today, when the government gives us its monthly statement of how much money is flowing in and out of the public coffers. Marketplace’s Brett Neely tells us the government is getting less and less of its money from the income tax.


Brett Neely: When you look at your pay stub, there are two kinds of taxes. There’s income tax — think 1040’s and April 15. And there are payroll taxes, which fund Social Security and Medicare. Those are flat taxes of about 15 percent that employees and employers contribute equally to on the first $100,000 or so of income.

Payroll taxes have long netted the government much less than income taxes. But not this year, says Len Berman at Syracuse University.

Len Berman: It’s primarily an artifact of the recession and the big income tax cuts that were enacted as part of the economic stimulus package.

Lost jobs and the sinking housing market have caused income tax revenues to fall $300 billion while the payroll tax has chugged along. But Berman says once the economy recovers, the income tax should start collecting more money again.

In Washington, I’m Brett Neely for Marketplace.

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