The economic downturn continues to affect people across the United States and the world. In an attempt to provide a small amount of financial relief for everyday people, Congress is currently considering a bill that would extend the payroll tax cuts that went into effect last year. If the bill doesn’t pass in time, workers will start seeing smaller paychecks at the beginning of the New Year. Needless to say, that would place an even heavier financial burden on struggling families and individuals. It could also have serious repercussions for those who are attempting to achieve financial freedom.
What are the Payroll Tax Cuts?
The payroll tax cuts that went into effect at the beginning of 2011 dipped into the total amount that a person contributes to social security. Detractors warned that this method could put more stress on the already weakened social security system, but so far no serious consequences have happened. When the tax cuts were originally put into place, it was done with the optimistic view that the economy would have improved by the end of the year. That clearly hasn’t happened, and the cuts are about to expire. If they do, workers will have smaller paychecks than ever.
How Much are the Payroll Tax Cuts Worth?
Normally, the payroll tax in question is levied at 6.2 percent of an employee’s pay. The cut reduced that amount to 4.2 percent. For a household that earns $50,000, that represents $1,000 annually. If the tax cut goes away, families will have even less cash. Methods like health insurance quote shopping can help make up some of the difference, but inexpensive insurance isn’t going to overcome the extra amount of money that will once again be taken out of everyday workers’ paychecks.
Extend the Payroll Tax Cut
As the recession continues in the United States, it’s important for Congress to get its act together and extend the payroll tax cut. Everyday people simply won’t be able to make ends meet if their checks are reduced even more by these taxes. Social security can wait. Even if a person finds a great deal on insurance through a cheap insurance quotes comparison website, he is still going to feel a major pinch when a lot more money is lopped off of his usual take-home pay. Until the economy dramatically improves, this tax cut needs to stay in effect.
Financial Freedom through Tax Cuts
If the payroll tax cut is extended, it could provide an extra means for people to achieve financial freedom. The extra money that they continue to take home can be invested and grown over time. At any rate, the extra cash should be set aside whenever possible. It’s tempting to spend it, and it may have to be spent if bills are overdue, but it should be saved whenever possible. Over time, it could add up to be a lot of money. That money could ultimately mean the difference between real financial freedom and living paycheck to paycheck.