At the stroke of midnight, your effective salary will shrink.
Starting Tuesday when the payroll tax break expires, around 160 million American workers will bring home less money with every paycheck. For workers earning $50,000 in annual salary, that means $80 a month slashed from take-home pay. That's nearly $1,000 for the year. Another way to think about it: It adds up to one less bag of groceries each week.
As of Monday afternoon, Congress and the President had not reached an overall compromise on the so-called fiscal cliff, the series of tax hikes and budget cuts set for Jan. 1. (You can get live updates on the negotiations on HuffPost.) However, even if a compromise is reached, the payroll tax hike is likely to happen starting Tuesday -- neither party has pushed to extend it.
The end of the payroll tax cut "is definitely a squeeze and one we are very concerned about," Chuck Marr, director of federal tax policy at the Center on Budget and Policy Priorities, a non-partisan research and policy institute, told The Huffington Post in October.
Passed in 2011, the payroll tax cut temporarily lowered the tax rate to 4.2 percent from 6.2 percent for income contributed to the Social Security program. The cut was designed to put more money into Americans' hands and act as an economic stimulus. However, economists are mixed on whether it has acted as a stimulus over the past two years.
Joseph Rosenberg, a research associate at the Urban/Brookings Tax Policy Center told Marketplace that if the Bush-era tax cuts are extended for the middle-class “then the impact of the expiration of the payroll tax is not likely to have a significant economic impact.”
With only hours remaining until the deadline on Monday, the chances of reaching a deal by the end of the year were only “a little better than 50-50” Rep. Chris Van Hollen (D-Md.), a leader on the House Budget Committee, told Bloomberg Television on Monday.