Payroll Tax Hike Will Hit Lower-Wage Earners Hardest

The wealthy won't be the only ones paying higher taxes under the New Year's Day fiscal deal.

The McConnell-Biden Plan allows the 2010 payroll tax cut to expire. The tax rate reverts to 6.2% on the first $114,000 workers earn this year. That’s up from 4.2% in each of the last two years.

“Although everyone is — it's the same 2%, additional 2% for everyone, I think it’s going to impact lower-wage earners the most.”

Barbara Hale is a tax principal with UHY Advisors.

“For someone who’s earning $30,000 a year, they’re going to be paying an additional $600, and to the extent that’s spread over 12 months, they’re going to see a difference of $50 less in their take home pay as a result of the expiration of this payroll tax holiday.”

In addition to wage earners, the payroll tax hike also applies to independent contractors and other self-employed individuals.

Bio photo of Andrew Schneider

Andrew Schneider

Business Reporter

Andrew Schneider joined KUHF in January 2011, after more than a decade as a print reporter for The Kiplinger Letter...