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Decoding the Payroll-Tax Cut: How Well Does It Work?

Extending the payroll-tax cut is the latest fight in Washington. But how much would it help the economy?

President Obama speaks on payroll tax cuts at Scranton (Penn.) High School, Nov. 30, 2011 in Scranton, Pennsylvania. (Photo by MANDEL NGAN/AFP/Getty Images)

Update, 12/19: A deal brokered last week by Senate Democrats and Republicans to extend the payroll-tax cut now looks likely to be blocked by House Republicans. House Speaker John Boehner said that the Senate proposal  a short-term deal that would only extend the payroll-tax cut by two months   would simply be “kicking the can down the road. The House votes tonight on the bill. As we’ve noted in our earlier explainer about the payroll tax cut, economists say allowing the cut to expire could have serious consequences for the still fragile economy.

As Congress tries to deal with its long list of unfinished business, among the top and most contentious items has been the proposed extension of the payroll-tax cut.    

It has certainly inspired plenty of political posturing. Democrats have charged Republicans with hypocrisy for opposing a measure that would put hundreds of dollars into the pockets of American workers; Republicans have fired back, accusing President Obama of failed economic policies and misguided efforts to grant tax relief to some while upping taxes on the rich, who they say often create jobs.

But looking beyond the rhetoric, how much has the cut helped the economy? And what do economists say would happen if it’s not extended? We run through the facts.  

First, what is the payroll tax — and how big has the cut been?

Take a look at your paycheck, and it will be very clear: The tax is the part of your wages withheld for Social Security and Medicare.

The Social Security portion of the tax has long been split evenly between employers and employees. Until last year, this meant that employees were paying 6.2 percent of their earnings and employers were paying the other 6.2 percent a total of 12.4 percent. The Medicare part of the tax is smaller 1.45 percent for employees and 1.45 percent for employers.

But a deal struck last December to extend the Bush tax cuts included a one-year cut to the Social Security portion of the tax. Employers kept paying 6.2 percent, but employees got a reduction of two percentage points.

That worked out to about $900 in savings for the average U.S. household last year, according to calculations by the Tax Policy Center. Unless Congress decides to extend it for another year, that tax cut will disappear.

It’s also worth noting that the payroll tax is a regressive tax. The main portion of it the part that goes to Social Security trust funds is a flat percentage on the first $106,800 of your paycheck. What that means is that people making more than $106,800 end up paying a smaller percentage of their wages in payroll taxes than do those whose paychecks fall short of that benchmark.  For instance, the cut aside, somebody making about $500,000 a year would pay only a little more than 1 percent to Social Security. (University of Chicago economics professor Casey Mulligan has a post in The New York Times’ Economix blog with some helpful background on the tax.)

So what’s Congress going to do?

The details are still being worked out, but it looks as if Republicans are moving toward reluctantly backing an extension of the tax cut, though not an expansion of it.  

The Obama administration originally proposed increasing the size of the cut and also cutting the portion employers pay. The administration put that proposal in its jobs bill, but that legislation is dead.

Divided on whether to even extend the 2011 cut, Republicans aren’t likely to back changes beyond the levels agreed upon last year, according to The Wall Street Journal. They’ve also opposed Democrats’ current proposal to offset the revenue gap by raising taxes on people making more than $1 million.

What’s the upside of extending the Social Security tax cut?

Well, you can see for yourself how it changes your paycheck. The White House has a payroll-tax cut calculator that can show how much you stand to lose if Congress doesn’t extend the tax cut.

But in terms of the larger picture, economic analysts have said that unless the payroll-tax cut and other short-term measures are extended, “fiscal drag will be intense in 2012.” Here’s The Washington Post:

Goldman Sachs economic forecaster Alec Phillips estimated that allowing the payroll-tax cut to expire would reduce growth by as much as two-thirds of a percentage point in early 2012. Macroeconomic Advisers estimates that it would reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs by the fourth quarter. 

Mark Zandi, chief economist at Moody’s Analytics, went a little further [PDF], estimating that if both the payroll-tax cut and extended unemployment insurance are allowed to expire, real GDP growth will fall by nearly a percentage point and about 1 million jobs will be lost by the end of 2012.

Ultimately, a simple extension of the payroll-tax cut means a continuation of what workers already have. That’s why economists and analysts talk less about any possible upside such a boost to consumer spending and cast it as a way to avert further damage to the economy.

What are the limitations and downsides?

The tax cut isn’t cheap. This year, it cost the Social Security trust funds $110 billion in lost revenue money that the federal government reimbursed by borrowing.

So, while it’s not true that a payroll-tax cut is bankrupting Social Security, it is adding to the deficit. Critics worry that, over time, a pattern of shifting funds from general revenue to the Social Security trust funds will weaken what was a largely self-funded program.

Another obvious limitation to the payroll-tax cut is that only workers — not the unemployed — benefit directly from it, which is why a proposed extension of unemployment benefits is often mentioned in the same breath. It’s also why the Obama administration has pushed to expand the tax cut to employers, hoping it’ll spur hiring.

But if boosting spending and creating jobs is the ultimate goal, some policy experts such as Bruce Bartlett, who once held top policy positions in the Reagan and George H.W. Bush administrations, note that cutting the payroll tax isn’t the best way of accomplishing that. After all, consumers or employers may have a bit more to spend, but that doesn’t mean they’ll spend that money or use it to hire people. Some of those dollars will undoubtedly end up in personal savings or company profits, muting the macroeconomic benefit.

Ultimately, Bartlett writes, directly spending the money, such as launching a public works project, would pack a bigger punch, even if it would be a tougher sell in Congress.

Wait, I’m confused…
Rraising payroll taxes by 2% is expected to “reduce GDP growth by 0.5 percent and cost the economy 400,000 jobs” but increasing taxes by 5% on a portion of the population that actually creates jobs is NOT expected to have a negative impact on jobs???

Doesn’t seem logical to me, but maybe I’m missing something…

Richard Tracy Sr

Dec. 1, 2011, 2:14 p.m.

The last effort to increase the take home pay weaken bothe the Social Securtiy program but the office of the Presiden and set the pattern for failre as well as extending the Bush Tax cute. Please do not give in again. The surtax should pay for that anti recession program and Fair trade should be on the table so we do not have to do it again. Is their an adult in the room? The american people are at the mercy of ALEC and multinational corporations with no one to defend them Mr President,Jimmy Carter all over again.

How stupid are “we”.  A payroll deduction of SS withholding cost the wage earner when SS benefits are calculated at age (when you retire) 65.  More now is less then.  Your BOSS doesn’t make or lose a dime!  You still get the same wages from the company so it never effects the PROFITS or makes a company want to hire more employees!! BUT it costs SS more since they have to borrow to pay currant benefits because they, ( the GOVERNMENT with the blessing of a Democratic congress) “stold” the funds in the TRUST FUND (joke name) to spend years ago.  If Congress was on SS, instead of their “private” retirement program, the funds would be there today!!

Concerning your statement “increasing taxes by 5% on a portion of the population that actually creates jobs…”

Do you have any facts and figures on how many jobs this 5 percent creates? How do hedge fund managers, football players and movie stars create jobs? How does Warren Buffet create jobs?

Anthony Margraf

Dec. 1, 2011, 2:36 p.m.

Corporations large or small have never created a single job, it is a myth.
Consumers create jobs, that is an incontrovertible fact.  Get rid of fundamentalist financial ideology and open your mind, you can do it.

Anyone get mailings and emails from The Commitee to Protect Social Security and Medicare?  They should be all over this in opposition but where are they?  Busy raising money for the Obama re-election no doubt.  If Bush had proposed this payroll tax cut they would having been screaming about how it hurts the long term solvency of Social Security.
And how about the progressively more and more left-leaning AARP?  Why aren’t they out front opposing this?  They were all about passing Obamacare whatever the cost.
Both organizations are hypocrites of the first order!

Jobs are not created by wealthy oligarchs deigning to spend a few pennies on the downtrodden masses. Thier taxes have steadily decreased for 30 years; their income gains have vastly outpased all other segments of society, so WHERE ARE ALL THE JOBS?

Jobs are created when demand for their products cause employers to increase production.

Period.

Giving the 99% more money in their pockets in a consumer-driven economy means greater demand.

It’s a poor driver of economic growth for all the reasons listed. A vastly better way to boost the economy would be to do things that get much more money into our pockets: things like taking all this money the world is desperate to stash in US T-Bills (at negative real interest! they’re PAYING us to take their money!) and using it to rebuild America’s infrastructure, which has been neglected to the point of disastrous consequences.

Rebuild our economy AND rebuild our country at the same time, whodathunkit!

If I don’t know anything else, I know that, if the 3.1% payroll tax cut advanced by the Obama administration is not passed, I will find a way to cut my personal spending by the amount necessary so that I create the tax cut for myself.  There was never much of a future in spending money.  Now the ONLY future is in saving it.

Estimates are that 35% of consumer spending is on imported goods. The last TV set plant in the US closed down years and and the I Pad is made in China. Take a look at the countries of origin of the goods in WalMart or Target. The stimulus effect goes to the countries that ship the goods, not the US. People who think otherwise are still living in the 1950s when we mostly bought our own products. What the US gets for it are the trade deficits and the budget deficits. Moreover, the taxes not collected would have been earmarked for the Social Security and Medicare trust funds bringing the bankruptcy of those two programs closer. Hail Columbia, Happy Land.

I agree that rich people don’t create jobs.  Of all the serious employers I can think of in this country, only Microsoft was founded by a trust fund kid.  Do they mean maids and landscapers?  Because if that’s the economy they’re targetting, I’ll pass, thanks.

(And yes, payroll tax cuts exists to undermine Social Security.  But I can understand the motivation, since we won’t need it if we starve to death before we retire…)

To respond to Bartlett’s “final word,” here, the reason that public works is a hard sell is because we keep floating these idiotic busywork projects instead of aiming high.  The Apollo Project got us a GDP return of twenty times over.  Census and Federal satellite data (available for any use for free) generates trillions in small business revenue, last I checked, for no more cost than the government would have spent to run itself anyway.

But public works with this government has no return on investment.  Filling potholes doesn’t change the world.  Paying a private company (or Russians) to run a space program increases their existing bottom line, but doesn’t change the world, either.  Releasing important data and works to the world, on the other hand, does demonstrably change the world and create jobs for decades.

Much better to invest in the right spots, rather than moving towards privatization and looking to stomp out any vestiges of a public domain, fair use, or the Internet, as Congress has been examining in the last few months.

A quick response here from one who teaches economics at the university level.  I only taught Principles of Macroeconomics one semester, mostly to freshmen (most people may remember this as Economiscs 102 or, in our case, 202, since there is a lower level intro course).  I have been astounded that students could not pass the course (about 1/3 fail or drop) because it’s not that hard, but people have substituted ideology for reason.

Keynes was not only the first substantive theorist on the concept of money, but perhaps the first modern macroeconomist.  I have a libertarian colleague (one might say “right wing”) who is the lead on our macroeconomics faculty and he chose the standard book our department uses to teach macro.  The author is John Taylor and he is, of course, a Keynesian.  He’s also a Nobel Prize winner and emeritus professor at Stanford (not a left-wing hotbed).

It’s just basic economics to understand, as others have noted above, that while government spending can crowd out private spending, a lack of demand drives recessions.  Either the private sector spends or the government spends; when the economy is going well, that’s the time the government reduces spending. The Tories are leading Britain into a very deep recession because they believe they can achieve prosperity by austerity.  I just cannot happen and it’s just basic logic (and it’s empirically verifiable).

People pushing to reduce deficits should have thought about that when they spent like drunken sailors (apologies to sailors) from 2001-2009 while cutting taxes at the same time.  That was a formula for insolvency, and we are approaching it now.  But we can only grow ourselves out of this man-made crisis; we cannot cut ourselves out of it.  There is no possible way to do this, period.

Too much of the debate revolves around morals and ideologies and not enough around reason and data.  I am no fan of the payroll tax cut, for reasons well articulated above, but we need to do so to keep demand from drying up and putting us into a downward recessionary spiral.  With Europeans trying to reduce government spending to achieve prosperity (and certain to fail), we cannot afford to follow them down that Austrian path.  We can easily pay for it by reversing the Bush tax cuts, which created the problem in the first place.

Many ideologues follow the Rahm Emanual motto: “Never let a crisis go to waste”.  Those who want government downsized are using the financial crisis to do so, and they will drive us back into recession, or worse. If Democrats are “tax and spend”, then Republicans are “borrow and spend”.  Which of these is fiscally responsible?  Obviously only the one that proposes to pay the bill, which is the former.

Growth is greed. Why is everyone obsessed with growth, gain, and accumulations of ‘things’?  You cannot eat your car so why have 5?
This strict adhesion to the principle & practise of ‘Growth’ is the reason we are running out of food & water. Ok the rich haven’t seen it yet, but give it another few years & they’ll be warring with the rest of us over the last cabbage patch.
The only remedy is to not want so much, to not succumb to our GREED!!!!

The 1% do not create jobs.  Most of these people are fat cat CEOs, who make very poor decisions and when they are fired leave with golden parachutes that would put the 99% in hog heaven.

The 1% move papers from one side of their desk to the other.  They create financial paper whose workings they don’t even understand.  That is how the financial bubble and near economic catastrophe happened.  Because these people were playing a game of smoke and mirrors.

Craig Cotora

Dec. 1, 2011, 11 p.m.

The payroll tax suspension suffers from exactly the same deficiencies as all of the prior “stimulus” actions…it is too little and, more importantly, it is the wrong kind of economic stimulus.

A bipartisan economic reform plan of tax reform (i.e. not just “closing loop holes”) and a national re-industrialization fiscal policy is offered at “The Economy Needs Fundamental Reforms, Not More Stimulus” at OpenSalon.com.

Exactly. The 1%, although being part of the problem, are a fairly small part. It’s all the rest of us who contribute to this problem (which, incidentally, is bigger that just American payroll taxes) by allowing this unbalanced system to continue. The earth is a finite place with finite resources. We must realise this, and understand that “Growth” it’s self is becoming an obsolete philosophy. We must curb this rampant consumerism before we run out of stuff to consume!!!!!

One has to question just how much stimulus these cuts provided. Economists I read say “Very little”. Yet, by continuing to espouse the idea of tax cuts, even if payroll taxes, Obama is playing into the hands of the GOP tax cutters. We need both higher taxes and more judicious spending if we are to reduce the deficit significantly. Pushing for a tax cut that has little benefit is not a smart thing to do.

Potomac Oracle

Dec. 2, 2011, 6:45 p.m.

The Administration needs to eliminate the entire FICA for both employees and employers.  Then make the Federal Reserve pay the amount of the tax without borrowing, since the Fed can issue funds interest free.

Moreover, because the government is the sole issuer of currency in the US it cannot go broke. Therefore, SS cannot go broke. Government checks for SS or anything else are merely additions or subtractions from Federal Reserve checking and savings accounts.

Taxes don’t pay for anything in a “fiat” currency.  Why when the government can print money as long as it abides by price stability and full employment objectives and uses automativ stabilizers to avert money inflation.

Keynsians neeed to remember that we are no longer operating under a gold standard or fixed exchange rates which require balanced budgets and othe self imposed constraints on fiscal and monetary policy..

Thanks, Mike for sharing your thoughts regarding your experience with students who seem unable to overcome their ideology in order to learn how macroeconomics functions. I’ve had mixed reactions when I see this happening. On one hand, I understand there are some very clever snake oil salesmen out there on TV land that make their stated theories seem to make sense. On the other hand, don’t people use their own common sense or simply open their eyes and see what is happening all around them? It’s hard to imagine anyone in this country who hasn’t been directly or indirectly affected by off-shoring, the real estate/credit crashes or at least some period of unemployment or known someone close to them that experienced this. And yet, they still buy the idea that the 1% are the ‘job creators.’ They still believe, 10 years after Bush’s ‘temporary’ tax cuts that were supposed to create jobs but didn’t that somehow it will happen ‘this time.’

Seriously, one of the problems is that too many Americans have ‘employee mentality’ and don’t think like a business owner. As a business owner, I won’t hire people I don’t need to run the business and make a profit. Why would I? If I need them, I will hire them. It’s that simple. As someone pointed out, the fat cat CEOs, hedge fund guys, actors, etc. are not ‘job creators’ of any scale. Although it would be great if we didn’t import so many goods and actually made more in the USA, there are still small businesses who do the importing and selling of the goods here.

In addition, too many do not understand how the government accounts for funds such as SS, compared to the general fund or how taxes really work. The payroll tax cut did not hurt the solvency of the SS fund because it was paid for by the general fund (via borrowing at almost zero interest…). It has nothing to do with how much one will receive in SS when they are eligible (as I think one commenter suggested).

I am pleasantly surprised to see the article covering the fact that the payroll tax (FICA) is a regressive tax. It weighs disproportionately on wage earners under $106k.

I cannot fathom how the Republicans dare to be so bold as to protect the top 1% from such a tiny increase at the expense of hard-working Americans. Apparently, their base just doesn’t get it.

David P. Summers

Dec. 3, 2011, 2:17 a.m.

[This may be a duplicate post, is so I appologize.]

I was disappointed to see and article that glossed over important fundamentals here.  It plays the kind of political word games that make me pessimistic the system will survive long enough for me to see even a portion of the money I have put into it.

The article blithely goes on about how this is a “regressive tax”.  Except it is not suppose to be a “tax”, in the sense that it raises general revenues, at all.  It is suppose to be a “contribution” to ones retirement insurance.  The rich aren’t being “forgiven” taxes, they are not making contributions at the costs of not getting benefits.  (And, if the program is worthwhile, this should be a bad deal.  And if it isn’t worthwhile, why do we have it at all?).

In fact, what is being done is eliminating any sense that the contributions lead to benefits.  After all, the reason it is an “entitlement” is because you are “entitled” to the benefits your contributions bring in.  What we are doing now is turning it into just another social welfare program which can be kicked around politically just like all the others.

Tweaking the amount of money that consumers have to spend isn’t going to solve the job situation.

The problem is that most of this money is going to purchase goods that are made in other countries.  More money in the pockets of American consumers means more jobs in China, not more in the U.S.

What we have to do is back off from free-trade.  Drop out of the WTO. This would make it profitable for rich people to invest in the U.S.  The result would be a sustainable American economy, with jobs for American workers.

Anything short of this is, at best, a stop-gap.

Joseph Fleischman

Dec. 6, 2011, 11:45 a.m.

Large-scale public works projects, like the CCC or WPA, will have to wait for the electorate to place progressives in Washington.  Until then, Payroll Tax reductions and Unemployment Insurance Extensions are about all we can get now. Questions about the fact that allowing these programs to expire would harm GDP are, at best, insincere.

With this reduction back in January Social Security is now running in the red and now we should pay in even less because Obama wants to kill the SS System.  He said so 2.5 years ago and that is the only promise he will keep it looks like.  By then it surely will default.

Joseph Fleischman

Dec. 6, 2011, 11:31 p.m.

This is a common misconception Viola. Social security doesn’t have a “lock-box”, and whatever shortfalls may happen in social security payments will be covered by the US Treasury, and although it would add to the deficit, social security payments will always be sent out, and on time.  That will be done just as payments on US treasury bonds will paid, and on time. Such are the first things to get paid. 

Your information re Obama wanting to kill social security is blatantly false. It was George W Bush who wanted to do that.  After his re-election in 2006 he went on a massive campaign, all across the country, to kill the program.  Conservatives have always hated social programs of any stripe - e.g., social security, medicare, medicaid, and CHIP, as conservative Republicans railed against them since their inceptions.  It’s the Democrats that brought us these programs (FDR, Johnson, and JFK) and since then, liberals and progressives have stood by them, for you, me, and all other working-class Americans who get paychecks.

I agree with Gene’s comment #3.  What I have actually found, this year is that some of the ‘company’ truck drivers I have spoken with, don’t even have a clue as to what is being done to their SS account.  Their conditioned response is often: ‘these taxes are too much’, its so funny to me~ because I give em a blank stare of disbelief, & say….‘your crazy, if you think your paying too much taxes, taxes have never been so low as the last 10 yrs…if you are paying taxes your doing something wrong!’.  Frequently if I pry into their business just alittle, I find, what I suspected, that they are paying very little in taxes, and even less this year specifically because of the recent SS percentage change.

I disagree with Marion Wang’s argument that the company continues to pay toward the employee’s SS account.. at the regular rate.  Not true for company truck drivers, because truck drivers utilize a tax expenditure device called ‘PER DIEM’ which basically considers common daily expenses such as lodging, meals, etc. and simplifies those expenses into one daily deduction from your gross daily pay.  This loop hole for the company is that same per diem deduction from the employee’s gross pay, treated as ‘non taxable earnings’ & therefore being non taxable, the company does not pay ANYTHING on that non taxable part of the employee’s gross pay.  The fun part for the company has now become quite the ‘daily ripoff’, the employees doesn’t notice, or the company requires enrollment in per diem, to the level of HALF of the employee’s gross pay, when subject to per diem, which has in fact REDUCED said employee’s & employer’s contribution to SS, as Marion Wang rightly points out in the article, a reduction that might be equivalent on the national level as $110 B/year.  This is not just aimed at truck drivers, all your construction, & mining & oil field & shipping workers, whomever are those that ‘work away from home’ frequently use per diem.

A brief example from my actual paycheck stub. 
Gross Pay $8854.74
Fed Income tax $ 818.03
Social Security tax $371.90
Medicare tax $128.39
State Income tax $311.83
Per Diem $5618.56    

I hope I have explained myself well enough that you can see, that of course the company ‘matched’ my contribution toward SS of $371.90, to remain legally compliant.  However of the Per Diem income $5618.56, the company paid $0, and I paid $0, toward any kind of tax, because Per Diem is ‘non taxable income’.

so tsame;)

In regards to the post of “so tsame” 
Please clarify for me. The Per Diem is in addition to the Gross Pay?
So that the actual gross pay or Total Pay was 14472.00, though taxes (payroll and income) were only paid on the 8854 figure.  Do I understand that correctly?  Thanks

Enjoyed reading Mike’s posts.  Reason and historical data ought to be the basis of economic policy.  Hear, hear! 

One analysis that I have not seen is the historical data on trickle down/J-Curve economic policy with its affects on economic performance.  It seems we have data from the Reagan era forward with which to do an analysis.  Or are there too many variables to come up with anything?

Economics should be a tool…not the philosophical or religious endeavor which it seems to have become over the last half century.  To cut to the important stuff, I keep asking myself:  How is it that any person in the USA should go hungry?  How is it that in this country we have people who cannot walk into a doctor’s office and receive decent medical care?  How much longer can we move ahead in the world with a broken, sub-standard educational system?

Gene…I was enrolled in per diem, as the pay stub reflects.  If I had NOT enrolled in the per diem, my gross pay would have been approx. $14472.00.  I think you see my point clearly enough.  The point being: the ‘per diem expenditure device’ is an example of HOW the government & business & employees have intentionally degraded SS, Medicare, & even state & federal Income taxes, at the initial source of work. 

Perhaps this excerpt from the company will help make the point:

FAQ~ Does participating in the per diem pay plan affect my future social security benefits?
Participation in the per diem pay plan will reduce your retirement benefits from social security. Per diem payments are not subject to FICA contributions and therefore not included in your earnings for purposes of calculating social security benefits. Retirement benefit calculations are based on your average earnings during your lifetime of work under the Social Security system. Although the plan will reduce some of your benefits, one option you may consider is to take the additional take-home pay you will receive from the program and contribute to your own retirement fund. If you have questions that are specific to your situations, we recommend that you consult with your tax adviser.

To further my point, in my example there was $5618.56 considered non taxable, the employer MADE MONEY from this & every other employee enrolled in per diem.  From my example yielded to the company UNTAXED PROFIT $5618.56 X 0.062% = $348.35, it also yielded to myself a tax liability discount of $348.35, the total amount $348.35 + $348.35 = $696.70 is therefore vanquished BEFORE it ever gets to the IRS.

It was President George Bush that caused me to look for this type of accounting practice, it just seemed ‘mathematically impossible’ to me that SS could be underfunded, and yet, so it has become ...intentionally.  And just there in the company’s answer FAQ, they finally urge employees to put that extra cash from per diem into an IRA, just like the President George Bush also urged.

its all pretty funny if it wasn’t so pitiful.

so tsame;)

Thanks for the information so tsame.  I was not even aware of this whole per diem “tactic” and the very clear stress it’s putting not only on Social Security revenues, but on federal and state revenues in general.

And now we have a leader (alleged) who seems only too willing to further undermine Social Security in the name of a 2% tax cut that many people would have to have pointed out to them to realize they’re even getting it. 

And even that will have no stimulative effect if anyone else has experienced what I have in the last year.  Can anyone comment on the following, is it new tax policy or something being done in accounting by my employer? 

I work part-time, make about 10k a year to augment my disability income.  In Feb 2009, starting with Obama’s stimulus package, I saw the federal income taxes withheld from my check reduced to almost nothing - literally less than 10 bucks withheld for the whole year.  And the same held true in 2010 (that was stimulative).

Then came the extension of the Bush tax cut at the end of last year and since Jan of 2011 my federal income taxes are being withheld at a rate even greater than they were before 2009.  About 350 bucks so far this year.  And the payroll deduction?  A little over 200 that I got to keep that would’ve otherwise went to Social Security - and should have.  So I’m having MORE withheld this year than in the previous 2 years EVEN with the payroll deduction.

I haven’t heard that related anywhere else.