While Congress avoided the so-called ‘fiscal cliff’ earlier this week, the compromise still carries a tax increase many Americans didn’t see coming.
The Social Security payroll tax will cost any citizen who receives a paycheck 2 percent more every pay period, rising from 4.2 percent to 6.2 percent. The hike means an extra $1,000 out of pocket for $50,000 worth of income.
It’s estimated 161 million workers are expected to see the tax increase by the next pay period, a quick surprise to many Americans in the work force.
"Especially since people just slipped into it. You know all of a sudden they have this money so they got used to spending it, and now all of a sudden, they have less money," certified public accountant Brad R. McGrew said.
Following the New Year’s Day House vote, President Obama told the public the tough fiscal decisions were mandatory.
"The deficit needs to be reduced in way that is balanced. Everyone pays their fair share,” the president said. “Everyone does their part. That's how our economy works best. That's how we grow. "
Two years ago, it was President Obama who lowered the payroll tax rate to 4.2 percent, but with bi-partisan support on Capitol Hill, the higher rate is seen as necessary in order to continue fund social security.
For taxpayer Sissy Hughes from San Jose, Calif., the extra grand in taxes is an unnecessary hit to American pocket books.
"The impact of a thousand dollars, sure that's a lot of money,” she said. “It takes a lot of food out of kids' stomachs, and it takes a lot of gas out of our cars, and out of the economy."
The president signed into law the bill to avert the fiscal cliff late Tuesday.
Hear from Brad R. McGrew, a certified public accountant, on the deal in the video below.
YNN: Fiscal deal brings higher taxes for most workers
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