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The Big Tax Increase Nobody Noticed

Author

Listed:
  • Dean Baker
Abstract
In January of 2013 nearly every worker in the country saw their payroll tax increase by 2.0 percentage points. The payroll tax holiday that had been put in place at the start of 2011 ended in December of 2012, leading to a jump in the Social Security tax from 10.4 percent to 12.4 percent of earnings up to the taxable limit. This was an extraordinarily large increase in the payroll tax. Past increases had generally been phased in gradually. For example, from 1980 to 1990 the tax rate was increased by a total of 2.24 percentage points; however in no year did the rate rise by more than 0.72 percentage points, just over one-third of the 2013 increase.3 If the public was strongly opposed to any tax increases, it would be expected that one as large as the 2013 rise in the Social Security tax would lead to considerable anger, especially given the weakness of the labor market which was still very much feeling the impact of the 2008-2009 recession at that point.

Suggested Citation

  • Dean Baker, 2014. "The Big Tax Increase Nobody Noticed," CEPR Reports and Issue Briefs 2014-15, Center for Economic and Policy Research (CEPR).
    • Handle: RePEc:epo:papers:2014-15
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    File URL: http://www.cepr.net/documents/ss-poll-2014-08.pdf
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    More about this item

    Keywords

    social security; payroll tax;

    JEL classification:

    • H - Public Economics
    • H5 - Public Economics - - National Government Expenditures and Related Policies
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue
    • H3 - Public Economics - - Fiscal Policies and Behavior of Economic Agents

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