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Workers Feel Effects Of Payroll Tax Hike

Lauren Madow |
January 12, 2013 | 5:09 p.m. PST

Executive Producer

The average worker will take home $700 less in pay in 2013.
The average worker will take home $700 less in pay in 2013.
Millions of Americans received their first paycheck of 2013 this week and are already experiencing the effects of the payroll tax hike. The hike went into effect on December 31, when a temporary cut in payroll taxes designed to stimulate economic growth in the wake of the recession expired. Taxes increased from 4.2% to 6.2% on workers' first $113,700 earned. 

Economists, financial bloggers and think tanks are making predictions about the hike's effects, and the consensus is largely pessimistic: A study just released by the Federal Reserve Bank of New York found that workers intend to cut spending "disproportionately" in order to compensate for higher taxes. Washington Post blogger Brad Plumer asserted that the hike "will basically wipe away all of last year's gains." Washington-based think tank the Tax Policy Center estimated that 160 billion workers will each take home about $700 less this year.

To hear DC taxpayers weigh in on the hike go here. 

For in-depth analysis of the payroll tax hike go here

For a calculator which shows how current tax policy affects you and your family go here

Reach Executive Producer Lauren Madow here.

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