A Tax Hike on Every Paycheck in Wisconsin: What’s at Stake for Wisconsin in the Fiscal Cliff
Day 3 of a series
More than three million Wisconsin workers would pay a total of two billion dollars more in federal taxes next year unless the payroll tax cut, which is scheduled to expire at the end of the year as part of the fiscal cliff, is extended. A typical Wisconsin worker will pay $546 more in payroll taxes next year if the tax cut is not extended.
The payroll tax cut temporarily reduced the taxes that workers pay into the Social Security trust fund from 6.2% of their income to 4.2%. Money from the general treasury was then shifted to the Social Security trust fund to make up for the loss in tax revenue.
Until recent days, the expiring payroll tax cut has received little attention in the fiscal cliff discussions. That may be starting to change. President Obama’s most recent offer to House Republicans in negotiations to avoid the fiscal cliff called for extending the payroll tax cut or a similar tax cut, and Congressional support is rising.
The payroll tax cut has been one of the most effective tax cuts in terms of bang for the buck, which makes it even more disappointing that the idea of continuing the tax cut has received so little attention. Allowing the payroll tax cut to expire would cause the economy to shed more than one million jobs in next year, according to the Economic Policy Institute, and would slow next year’s economic growth by 0.6%.
Other posts in this series on Wisconsin’s stake in the fiscal cliff: