The first payday of 2013 for most Americans won’t be as small as it could have been, but as those paydays come in the weeks ahead, make no mistake, those paychecks will be getting smaller. Every working American will see their take-home pay cut by the 2 percent increase in Social Security payments.
While Congress approved a deal not to raise income tax rates on Americans making under $400,000 (for couples $450,000), the agreement did not extend the employee payroll tax cut that has been law for the past two years.
Instead, every worker will see the portion of their paychecks going toward Social Security go up 2 percent — returning to the same percentage it was prior to 2011.
A 2 percent increase doesn’t sound like a lot. Consider that forecasts for the U.S. economy to grow by two percent are greeted by howls of disappointment.
However, paying 2 percent more out of the median household income in the United States means just over $1,000 less pay over the course of a year.
For working Americans making around $50,000 and paid every Friday, they will see about $20 less in their checks this week.
The missing money won’t break the bank for most households, but it does starve the economy of billions of dollars in spending.
Tom Hudson is anchor and managing editor of Nightly Business Report, produced by NBR Worldwide and distributed nationally by American Public Television. In South Florida, the show is broadcast at 7 p.m. weekdays on Channel 2. Follow him on Twitter, @HudsonNBR.