How many are helped by deal on payroll tax cut?

Members of a House-Senate committee sealed a deal on extending the payroll tax cut through 2012. (Source: J. Scott Applewhite/Associated Press)
Members of a House-Senate committee sealed a deal on extending the payroll tax cut through 2012. (Source: J. Scott Applewhite/Associated Press)

U.S. Sen. Max Baucus, revealing a congressional deal affecting pay checks, told reporters: "This is very important for a lot of people. 160 million Americans are now going to maintain their payroll tax cut."

As reported by Fox News, Baucus, a Montana Democrat, was speaking Feb. 15, 2012, to House-Senate agreement on legislation to renew a 2 percentage-point cut in the federal payroll tax and the extension of jobless benefits for millions of unemployed workers.

And that 160 million figure is about right. The Social Security Administration has said that 158 million workers held jobs subject to the payroll tax in 2011.

But that’s not the same as saying 160 million U.S. families will benefit.

We came upon this wrinkle during a December 2011 fact-check of a claim by U.S. Rep. Charlie Gonzalez of San Antonio. He said in a Dec. 13, 2011, press release that nearly 160 million working families would see a $1,000 tax hike if the payroll tax cut was not extended through 2012.

The payroll tax at issue is the 6.2 percent of eligible earnings that American workers pay to help fund Social Security. It’s called a payroll tax because the money is taken directly out of people’s paychecks. There are limits to the total amount that individuals are required to pay. In 2009 and 2010, the levy applied to the first $106,800 of salary, meaning no one would pay more than $6,621. Employers paid a matching share.

In December 2010, the employee tax was cut to 4.2 percent through 2011 as part of an agreement President Barack Obama worked out with Congress to extend income-tax reductions passed during President George W. Bush’s administration.

And that 160 million families figure? In an interview, Roberton Williams, a senior fellow at the Urban Institute-Brookings Institution Tax Policy Center, an independent research organization, walked us through its estimates of the impact of renewing the current payroll tax cut through 2012.

The center estimates that the country will have 165 million households this year, though only 122 million households are projected to benefit from the extension of the tax cut. About 40 million households will not benefit, Williams told us, because the residents are not projected to have paying jobs.

Summing up: About 160 million workers will enjoy the expected extension, accounting for 122 million households.



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