WV Center on Budget and Policy > Blog > Tax and Budget > After The Cliff: What The Payroll Tax Holiday Expiration Means To West Virginia

After The Cliff: What The Payroll Tax Holiday Expiration Means To West Virginia

Although a “fiscal cliff” deal to prevent tax hikes and sweeping spending cuts was brokered at the eleventh hour, West Virginians will still see a tax increase. The rarely mentioned payroll tax holiday has officially expired, impacting the paychecks of about 900,000 working West Virginians.

Enacted in 2010, the payroll tax holiday was designed to bolster consumer spending and pull the weakened economy out of stagnation. The money came from taxes paid to fund Social Security, half of which is paid by employers, half paid by workers. The workers’ share was reduced from 6.2 percent to 4.2 percent, providing an additional $855 in take-home pay for the average West Virginia worker.

Now that the payroll tax holiday has expired, workers can expect their paychecks to shrink. This can potentially hurt working families trying to make ends meet in this tough economic environment. Below is a list of occupations in West Virginia and the potential impact of the payroll tax expiration. The Wall Street Journal has also created a payroll tax cut calculator that shows how much more a worker will pay in 2013. 

Impact of Payroll Tax Cut Expiring

Occupation

Average Salary

Increase In Taxes

Home health aide

$17,990

$360

Cashier

$18,110

$362

Hairdresser

$23,320

$466

Truck Driver

$34,230

$685

Machinist

$35,520

$710

Real Estate Broker

$37,600

$752

Plumber

$45,980

$920

Electrician

$49,700

$994

Computer Programmer

$54,960

$1,099

Registered Nurse

$56,820

$1,136

Marketing Manager

$74,490

$1,490

Source: Bureau of Labor Statistics, May 2011

Even though the payroll tax holiday has expired, West Virginia Senator Jay Rockefeller remains optimistic about the other aspects of the fiscal cliff legislation

“If Congress had failed to pass this bill, tax credits that help low- and middle-income West Virginia families pay their bills and afford college would have disappeared,” stated Rockefeller.

Tax cuts re-enacted under the new legislation include:

  • Earned Income Tax Credits, which returned $329 million to almost 160,000 working West Virginians in 2011 — more than $2,000 for each person who qualified.
  • Expanded Child Tax Credits of $1,000/child that help 102,000 West Virginia children and their families.
  • American Opportunity Tax Credits that gave 33,000 West Virginians $64 million in 2011, averaging almost $2,000 per student in college. This credit can be used to pay for tuition, living expenses and textbooks.
  • The New Markets Tax Credit, which has provided more than $55 million in new investments for economic projects in low-income and rural communities, including hardware stores, child day-care centers and local coal mines. The program has created 300,000 jobs in low-income communities.

Continuing the payroll tax holiday would be beneficial for working West Virginians, however, as President Barack Obama stated, “nobody can get 100 percent of what they want.” While this may translate to smaller paychecks, a state Earned Income Tax Credit that can provide supplemental cash to working families and Medicaid expansion that reduces uncompensated care costs and saves the state millions of dollars could both help ease the financial strain on low-income families.

2 Responses to “After The Cliff: What The Payroll Tax Holiday Expiration Means To West Virginia”

  1. dan doyle says:

    Hi Stuart,
    I was opposed to the deal in ?2010 that created a “tax cut” by taking money out of Social Security deductions. So I am glad the full Social Security deduction is back. Many people thought in 2010 that this deal was playing right into Republican hands to weaken Social Security and hasten its “bankruptcy”.
    I also support eliminating the $110,000 limit on income for Social Security deductions. This makes it a regressive tax. I’d like to see it go up much higher. Even then it would be a regressive system since the annual income of the Warren Buffets is not mainly wages.
    Dan Doyle
    Fayette Fair Share
    Oak Hill

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