Essentially, that raises taxes on the poor and middle class. Yet it would have little, if any effect on the wealthy. Why? The tax only applies to the first $106,800 of a worker’s wages. Thus, no matter how much money someone makes, they will see a maximum benefit of $2,136 from the holiday.
This cap on the payroll tax means a millionaire pays very little toward Social Security. It's been suggested that the easy way to fix the social security "problem" is to eliminate the cap. Additionally, since the U.S. government has "borrowed" from social security, paying those funds back would fix the issue, as well.
ThinkProgress reported the issue as follows:
"Conversely, payroll tax cuts are one of the most efficient ways to stimulate economic growth, because low- and middle-income earners are more likely to spend their extra cash right away. But this analysis and similar ones from Moody’s and other experts has not disuaded Republicans from their myopic focus on tax cuts for the the wealthy only.
"GOP budget guru Rep. Paul Ryan (R-WI) dismissed a payroll tax holiday in June as nothing but “sugar-high economics.” Meanwhile, presidential candidate Mitt Romney said he 'would prefer to see the payroll tax cut on the employer side,' instead of for the employee. Both sides pay an equal amount for a total contribution of 12.4 percent per worker.
"Indeed, the conservative dogma on taxes seems to flip for low-income earners, as many conservatives have explicitly called for the poor and middle-class to pay more in taxes. "
The reasoning behind this is the faux idea that 50 percent of the U.S. does not pay taxes. That is true for INCOME taxes only; the poor and middle class pay plenty in sales tax, property tax, social security tax (which, as we've outline, the rich pay almost nothing of), medicare, and more.
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