Congress did pass a large tax package and I have summarized some of the main points on our website.
One of the major features of the tax package is a one-year reduction in the FICA payroll tax that funds Social Security. The employee portion of FICA taxes will drop from 6.2% to 4.2% for most workers. Since the tax applies to up to $106,800 in 2011, the tax cut is worth as much as $4,272 for a working couple. But not everyone will benefit equally from this payroll-tax cut. Millions of lower-income workers may actually pay more than they did last year. Although they will benefit from the lower payroll tax, the tax break will not be as generous as the Making Work Pay credit that reduced their taxes by up to $800 for married couples in 2010.
For example, a married couple each earning minimum wage will see their payroll taxes reduced by about $605 in 2011. Compared to the $800 Making Work Pay tax credit they received in 2010, their taxes would increase by almost $200 next year. But for a wealthy couple each spouse earning $250,000 they would save $4,272 compared to $0 last year when they did not qualify for the credit because they made too much money.
So, to summarize; middle and high income earners will receive a substantial tax cut in 2011 and low income earners may pay more in 2011 than they did in 2010. Gee..... this must have been in the fine print of the campaign promises.......
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