The impending possibility of a payroll tax cut could have implications across the board, from millennials to those collecting social security. Learn more about what tax cut could mean for you from Paramount Tax Relief in Sacramento.
What is a Payroll Tax Cut?
Payroll taxes are the sums taken out of your paycheck to fund Medicare and Social Security.
President Donald Trump’s temporary payroll tax cut would be intended to increase consumer spending by decreasing the amount taken out of salaried Americans’ paychecks.
The current tax rate deducts 6.2% of your paycheck for Social Security and 1.45% for a Medicare tax. Employers match these percentages, and those making more money (over 200,000 on their own or $250,000 when married and jointly filing), up the Medicare tax contribution by 0.9%. Rates are also higher for self-employed individuals, coming in at a 12.4% deduction for Social Security and 2.9% for Medicare.
Potential Effects of Trump’s Tax Cut for Sacramento Residents
While this sounds like a positive initiative that leaves more cash in your bank account, it might also have effects on the Social Security and Medicare funds. Both have faced a lack of funding and would need to be supplemented from general revenues, according to experts. This tax cut could also run the risk of increased taxation for future generations and affect benefits currently available for those in and nearing retirement.
This is not the first time a tax cut has been on the presidential to-do list, as Former President Barack Obama enacted a cut from 6.2 to 4.2 percent in 2011 and 2012. Some experts contend that right now is not the time to enact a tax cut, with consumer spending up, decreasing unemployment, and interest at low rates.
President Trump has not confirmed how big this tax cut would be, and average employees may not notice a huge difference when they receive their paychecks. Experts estimate full-time employees would save an average of $908 annually, with higher wage earners saving up to $2,658. These cuts may also end up costing the government money, however, further upping national debt.
Get Sacramento-Specific Information From Paramount Tax Relief
If you need more information about the potential implications of this tax cut, our team of professionals at Paramount Tax Relief is here to help. Our testimonials account for our dedication to helping taxpayers, no matter what your concerns may be. Don’t hesitate to fill out our simple questionnaire and contact us today!