Washington, DC – Paychecks are getting smaller. While many Americans are breathing a sigh of relief that their income tax did not increase, there is nonetheless a tax increase that will impact all paychecks.
The Social Security payroll tax rate was reduced for 2011 and 2012, with the employee contribution cut from 6.2 percent to 4.2 percent. The intent was to put more money in people’s pockets, thus stimulate spending. The rate will now increase to the former level, resulting in smaller paychecks for American workers.