If you have a job, by now you almost certainly have felt a tax hike that didn’t get a lot of attention during the fiscal-cliff debate: the two-percentage-point increase in the payroll tax.
This tax applies to everyone, not just the wealthy, and it promises to make saving for retirement — or any big ticket — especially challenging. The payroll tax, which funds Social Security and Medicare, is now 6.2% on wages up to $113,700. The tax rate had been at that level until two years ago, when it was cut to 4.2% in an effort to revive the economy.
About 160 million workers pay this tax, and this year’s increase will cost the average worker about $700, according to the Tax Policy Center in Washington. A family with household income of $50,000 will pay about $1,000 in additional tax. This is real money for millions of families.