THE IMPACT OF THE 2011 PAYROLL TAX CUT ON WORKING AMERICANS

U.S. Treasury Department
Office of Public Affairs

FOR IMMEDIATE RELEASE: January 14, 2011

CONTACT: Treasury Public Affairs, (202) 622-2960

The Impact of the 2011 Payroll Tax Cut on Working Americans

Less than one month after President Obama signed a payroll tax cut into law as part of the Tax Relief, Unemployment Reauthorization and Job Creation Act of 2010, millions of American workers are already seeing the impact of this tax cut in their paychecks.  By reducing the payroll tax paid by employees from 6.2 percent to 4.2 percent, the payroll tax cut is already providing a boost to workers’ paychecks and to the economy:

• $110 Billion in Tax Relief[1][1]: The payroll tax cut is expected to provide $110 billion in tax relief to working Americans.

• Tax Cuts for 159 Million Workers: As a result of the payroll tax cut, some 159 million working Americans are expected to receive larger paychecks this year than they would otherwise.

• An Average Tax Cut of $695 Per Worker: The expected benefit received from the payroll tax cut is an average of $695 per worker.

• Payroll Tax Cut Would Have No Impact on Social Security Solvency: Each worker’s Social Security benefit will be calculated without regard to the tax reduction and the Social Security trust fund will be made whole by transfers from the General Fund. Social Security’s Chief Actuary wrote that the projected level of the Social Security trust fund would be unaffected by the payroll tax cut.

• Payroll Tax Cut Provides Significant Boost to Economy and Job Growth This Year: Independent economists — from the CBO to Mark Zandi to Nouriel Roubini — have estimated that a payroll tax cut could provide a significant, immediate boost to growth and jobs.

This tax cut is in addition to other job-creating provisions of the Act. These include expansions of the Child Tax Credit and Earned Income Tax Credit for working families, and the American Opportunity Tax Credit, which helps students and their families cover the cost of college tuition, extended unemployment insurance and business tax cuts. Together, independent analysts project that this package will result in the creation of 1.5 million or more additional jobs.