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Payroll Tax Hike Could Be On The Way
One of the consequences of the 'fiscal cliff' is more money getting taken out of your paycheck. The payroll tax cut that boosted your check over the past two years may go away if we take the plunge.
The University of Texas, one of the area's largest employers, is warning employees about this possible reduction in pay.
The Tax Policy Center estimates that should this benefit expire, 125 million households would see their paychecks shrink.
President Obama introduced the payroll tax cut as a temporary measure to stimulate the economy in 2010, and a revival of the tax break isn't out of the question, but lawmakers are headed home for Christmas without a deal to stop the automatic tax hikes and spending cuts set to kick-in Jan. 1.
If it does expire, the payroll tax rate would revert from 4.2 percent to 6.2 percent -- pulling money out of people's wallets that may be struggling even now to get by.
What does this mean for you ? The Tax Policy Center estimates a person making $50,000 would see their paycheck drop by $83 a month, or nearly $1,000 a year. Someone earning $30,000 would lose $50 monthly, adding up to $600 a year if the payroll tax cut expires.
Experts say if cuts expire it would hurt lower and middle class families the most. Economists have warned we could fall back into a recession.
Lawmakers are expected to return to Washington after Christmas to find a solution.
By Angel Covarrubias