Payday looks different after expiration of Social Security payroll tax cut
Rate jumps 2 percent to pre-stimulus level
Last Updated: 134 days ago
INDIANAPOLIS - Congress avoided putting the nation over the fiscal cliff, but not all is well.
For starters, virtually every worker will see a smaller paycheck this year because the Social Security payroll tax cut enacted in 2011 has expired, sending the rate from 4.2 percent to 6.2 percent.
"Two percent may not sound like much, but to some people, it may mean $15 to $20 a week," said Amie Dailey, office director at a downtown hardware store.
A study by the Federal Reserve Bank of New York suggests that workers will respond by spending less on things like entertainment and restaurants, which is expected to slow the economy.
"It changes how I take my family out," said Hoosier George Walker. "Cuts a lot of going to restaurants, movies… the boys like to go to football games."
A thousand dollars that went toward Colts season tickets for the Walker family might be spent differently this year, Walker said.
Nicholas O'Connor works 30 to 35 hours a week at a downtown hardware store, and he's about to find out how much less will be in Friday's paycheck and how that will affect his spending.
"It's not going to be in the bills, the car payment... that stuff has to be paid," O'Connor said. "It's going to be in the money you've saved at the end of the week to do something exciting."
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