It’s a virtual certainty — your paycheck is getting smaller on New Year’s Day. And it could shrink even more a few weeks later.
Even if Washington strikes a deal to avert the fiscal cliff, a payroll-tax holiday will expire on New Year’s Day, taking a 2 percent bite out of paychecks.
The payroll-tax holiday — which reduced Social Security taxes from 6.2 to 4.2 percent — was always meant to be temporary when enacted two years ago, and extending it hasn’t been a part of negotiations.
“Expiration of the payroll-tax cut should show up in paychecks immediately in the new year,” said Donald Marron, head of the nonpartisan Tax Policy Center.
And that’s not all: If Congress doesn’t extend the Bush-era tax cuts for middle-income Americans, late January and early February will be meager months for workers as well.