CINCINNATI, OH (FOX19) - Chances are, your paycheck's getting smaller. Pres. Obama and Republicans in Congress did not include an extension of the payroll tax cut in their Fiscal Cliff deal last week. So now we're responsible for 6.2% of the Social Security taxes taken out of our paychecks, rather than 4.2% like it was for the past couple of years.
That extra 2% adds up to a lot of money. For a person making $50,000 a year, that's an extra $1,000 they've been able to take home over the previous 12 months.
It'll be interesting to see if Americans getting less take home pay affects the economy. A new study by the Federal Reserve Bank of New York shows that consumers spent 36% of the extra money they took home when the payroll tax cut was in effect. Higher income people went shopping. Lower income people paid down their debts.
Speaking of debt, two professors writing in the New York Times suggest Social Security is shakier than we've been led to believe. And critics of the payroll tax cut say extending it this year would've just gotten the country in even more dire financial straits.