Each employee pays 6.2% of their $106,800 in salary into Social Security. Employers match that amount, and each party also pays 1.45% into Medicare. The one year tax reduction from the payroll tax credit will reduce the employee’s contribution by two percentage points, meaning employees will pay only 4.2% of their first $ 106,800. That means low income workers will pay several hundred dollars more than they’re paying now, while high income workers will pay roughly $2,340 more. But some type of extension seems likely, now that both Democrats and Republicans have publicly supported extending the payroll tax cut for individuals. However, it’s not a done deal since the parties don’t agree on how to pay for the extension. Nor do they agree on the size and reach of the tax cut. President Obama and Senate Democrats would like to expand the cut so that workers would pay 3.1%, down from 4.2%. Senate Republicans, meanwhile have proposed extending the current payroll tax cut as is. If that were the case, the impact for workers is that they would see no difference in their payroll tax liability next year. But if congress expands it along the lines proposed by Obama, which seems unlike after Senate Democrats’ proposal was rejected workers would pocket even more than they are this year. The payroll tax cut for individuals was originally passed at the end of 2010 to help boost the flagging economy. Given the disappointingly slow pace of recovery since then, however, many politicians and economists are pushing to keep the tax cut in place for another year.
"This is the medicine that