Workers, Business Owners Not Happy With Payroll Tax Hike

HUNTSVILLE, Ala.(WHNT) – The fiscal cliff freefall may have been temporarily avoided, but most Americans will still be paying higher taxes this year anyway thanks to what’s coming out of their paychecks.

Part of the deal negotiated by President Obama and Congress calls for an increase in the payroll tax, affecting even the lowest-wage earners. Social Security deductions will now return to their pre-2010 levels of just over 6.2%, meaning an employee who earns $50,000 per year will now have to pay an extra $1,000 in taxes in 2013.

Some economists fear the higher tax rates could help spark another recession, with local business owners saying they have no choice but to pass the cost on to customers.

New Market resident John Grantham has been running his own home improvement business for five years, and said the payroll tax hike approved by Washington couldn’t come at a worse time.

“They don’t have a clue,” said Grantham. “The bottom line is they want me to do what they’re already doing, and that is pay them money that I don’t have.  I guess so they can spend more money that they still don’t have…I’ve already explained to some customers that I need to do that [raise prices]…either they can pay what I need to have, or not.”

The so-called “payroll tax holiday” was implemented in 2010, when Social Security tax rates were lowered from 6.2% to 4.2%. The return to the old rate means that the average U.S. worker who gets paid every other week will see a paycheck decrease of $31.

See what the new payroll taxes mean for you.  Use this paycheck estimator based on figures from the U.S. Treasury.


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