If you did not notice when you received your first paycheck of the New Year, your take-home pay has decreased, since December. The reason has lots to do with Congress not extending the reduced Social Security tax rate that was passed two years ago.
As some would say “la fiesta se acabo” translated the party is over. The tax holiday that we all have come to enjoy while the economy was getting back to its feet is now over and the 2% reduction from Social Security has gone away. As of January 1, 2013 Social Security tax rate for individuals have gone back up to 6.2%, from the previous rate of 4.2% that was passed by Congress two years ago. Some might not have seen the change in their paycheck since the government is giving employers a deadline of February 15, 2013 to fully implement the increase in tax rate. While many major corporations have implemented the new rates, some employers might still be trying to figure all these new numbers out.
So what does this mean to the average Latino household? According to the Hispanic Pew, the median household annual income for Latinos is $40,000 before taxes. That means the average Latino household (married and have kids) would be paying about $700 more per year, or about $27 per pay period if they received a paycheck every two weeks. If the household income is $50,000 before taxes per year, they will pay about $1000 more in payroll taxes this year or about $38 more per pay period. If their salary before taxes is $100,000 per year, they will pay about $2,000 more or about $77 more per pay.
Though Congress avoided the “fiscal cliff” and the top earners will be pay more in taxes as their tax rate has increased. The average family with a median household income between $40,000 and $100,000 will also end up paying more. In the end, the middle class once again gets hit where it hurts the most.
Follow Juan Torrico on Twitter @juantorrico