Are you ready for your 2012 pay cut?

Unless the Super Committee can agree in time, everyone paying payroll taxes will see a 2% increase in their payroll taxes on their paychecks come 2012. Payroll taxes were cut from 6.2% to 4.2% at the beginning of 2011 to help stem the tide of recession. This put a little bit more into our pockets each month in 2011, but, in my opinion, this is unlikely to continue.

We got a letter from my spouse’s employer informing us that the organization is increasing salaries by 2% in 2012, which will offset the taxes, so his paychecks will stay the same. My employer is increasing salaries by 1%, so I’ll actually see a decrease come January. We will budget with this in mind, which is all we can do. Better to know this now than after our first paychecks of the year and the budget being short.

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2 thoughts on “Are you ready for your 2012 pay cut?

  1. Someone getting a 2% raise should see their paycheck decline as well, because that raise is now also getting taxed at the new level.

    $40,000 taxed at 4.2% = $38320 left over

    $40,800 taxed at 6.2% = $38270 left over

    Month by month it’s a small change, but still best not to be surprised by it.

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