Payroll taxes are set to decline in 2011, now that the tax deal has been signed into law by President Obama.
Social Security taxes, which have remained flat at 6.2% of gross income for many years, are going to decline to 4.2% for the 2011 calendar year. This lower rate, in effect, turns back the Social Security tax to 1970 levels.
Social Security taxes are normally matched, dollar for dollar, by employers. However, for matching purposes, employers will still have to pay the full 6.2% tax on employee gross pay. Had the matching amount also been reduced, it could have led to increases in hiring, but the White House and U.S. Congress decided it was too much tax cutting for an already fragile Social Security budget.
Critics of this tax reduction rightfully worry it will move the Social Security system toward insolvency. The system has been headed in this direction for some time, but a tax reduction will only accelerate the process. This two percentage point reduction will effectively cut Social Security tax revenues by approximately 16%.
Houston area employees and others across the United States can expect to see this tax reduction on their first paycheck in January, 2011.
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Comments
How about the tax I will now have to pay on my health benefits that had been exempt?
How about the tax I will now have to pay on my health benefits that had been exempt?
Don't get too excited.....the " making work pay" program that lowered Federal Income Tax expired at end of 2010, so you may see a decrease in your SSI tax payments, but it will be mostly eaten up by the increase in Federal withholdings....not publicizing that lil' tidbit, are they?
Bob, you are right. Looking at my check stub right now and comparing it with thelast one from 2010. Federal withholding did go up about 6.00 however social security when down about 55.00. Sooo...if my situation in comparable to most Americans (and I don't see why it wouldn't ) we are still coming out on top. I can deal with that...Obama '12!
I'm a republican and NOT an Obama fan, but I will give the House and Senate (run mostly by republican's now) credit for finally implementing a good bill. Like the author said, the SS was dwindling anyway and was expected to run out by gen Y retirement (possibly as soon as gen X). I believe that this tax breaks intention is to put more money back into the hands of "working" people so they could save it for their own retirement. If you're in a younger generation...this is more important than ever now. Take this opportunity to increase your 401k contributions by 2%!!!
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