Payroll Tax Holiday May Not Survive Year's End

Play associated audio

An occasional series, Fiscal Cliff Notes breaks down the looming "fiscal cliff" of expiring tax cuts and deep automatic spending cuts set to hit around the first of year.

If you work, you've probably been getting this tax break: Since January 2011, the government has knocked 2 percentage points off the payroll tax.

For someone making $50,000 a year, the payroll tax holiday works out to about $20 a week.

"We definitely notice it," says Steve Warner of Winter Haven, Fla., while on vacation with his family recently in the nation's capital.

"Most of what we use that for [is] just our day-to-day bills that we have. I mean, it's not like we put it away in savings or anything. It's just more money that we can actually use for gas, food and certain things like that."

That's exactly what Congress and the president had in mind when they created the holiday. But it ultimately didn't have the effect many economists had hoped for, because two years in a row, in the spring, gas prices spiked and ate up a lot of that extra spending money.

"It didn't really help support stronger growth, but it certainly helped the economy," says Mark Zandi, chief economist at Moody's Analytics. "Without it we'd be in a measurably worse place."

But even as the economy appears to still be in a rut, there's little appetite to extend the tax holiday — with its $95 billion price tag — one more time, says Zandi.

A year ago, Zandi was among those pushing for an extension. Now he says it's time to let it expire on Dec. 31. And unless something changes, it will.

Caitlin Morgan, a mother of four boys from Eugene, Ore., says for her family, the extra money was plowed into food and other living expenses. But she seems to accept that the holiday may well be over at the end of the year.

"[The] government needs to prop itself up," she says. "We need to get out of this debt. So you know, if we need to cut a few corners for that to happen, then that's OK. I'm OK with that."

Copyright 2012 National Public Radio. To see more, visit http://www.npr.org/.

NPR

In 'Porcelain,' Moby Searches For Validation And Finds Unlikely Success

The electronic musician's new memoir traces his journey from Connecticut suburbs to New York City raves. It's a tale of dance clubs, DJs and Manhattan in the 1990s full of self-deprecating humor.
NPR

To Survive The Bust Cycle, Farmers Go Back To Business-School Basics

Farming is entering its third year on the bust side of the cycle. Major crop prices are low while expenses like seed, fertilizer and land remain high. That means getting creative to succeed.
WAMU 88.5

Power Plant Fight In Prince George's County

A predominantly African American community in rural Prince George's County recently filed a federal civil rights complaint in response to plans to build a third power plant in one town, and fifth in the region.

NPR

Reports Peg Tech Billionaire As Funder Of Hulk Hogan's Case Against Gawker

The New York Times says entrepreneur Peter Thiel confirms he has been bankrolling the ex-wrestler's lawsuit. Gawker is appealing a jury award to Hogan of $140 million over publication of a sex tape.

Leave a Comment

Help keep the conversation civil. Please refer to our Terms of Use and Code of Conduct before posting your comments.