WASHINGTON — Shoppers budgeting for Black Friday and beyond might want to consider this: Come January, workers' paychecks will likely be a little smaller.
The payroll tax break that has given the average Oklahoman an extra $580 a year is set to expire, and there has been little talk of extending it for another year as President Barack Obama and Congress prepare to negotiate on income taxes and spending cuts.
Rep. Tom Cole, R-Moore, a member of the House Budget Committee, said Wednesday that it's a topic on which Republicans and Democrats appear to agree.
“We haven't had a bidding war here,” he said. “You have to come off this fiscal high one step at a time.”
At a Budget Committee hearing earlier this year, Cole asked a White House budget official whether the president would seek to extend the payroll tax cut in 2013.
“We're confident that we'll be in the type of shape economically that we can end the payroll tax holiday,” Jeffrey Zients told Cole then.
House Democratic leader Nancy Pelosi told reporters in September, “I would hope that we would not extend it.”
Cole said allowing the payroll tax rate to revert to its normal level “will hit every single person who works.”
But he said it would be prudent not to extend it since the tax is dedicated to Social Security, which is “an important component of Americans' retirement.”
Rep. James Lankford, R-Oklahoma City, a Budget Committee member, said Wednesday that he has also heard that the tax break would be allowed to expire. Continuing it, he said, would threaten the viability of Social Security or add to the nation's debt.
The tax break, sought by Obama in 2010, has been in effect since January 2011, when the 6.2 rate for workers was reduced to 4.2 percent. The tax was intended to last just one year, but, after a protracted fight with Republicans, Obama secured the lower rate for 2012.
To avoid a $108 billion hit each year on the Social Security Trust Fund, money was paid into the fund from general revenue, which essentially means that it was borrowed.
The payroll tax reduction replaced the two-year income tax break — $400 for single taxpayers and $800 for couples — that was part of the 2009 stimulus bill.
Cole said the payroll tax break may have had a modest effect in stimulating the economy, “but that's it.”
Lankford said it would be hard to tell next year whether returning the tax to its normal rate hurts the economy because other tax increases linked to the health care bill will go into effect. Among those, he noted, are higher taxes on investments for people making more than $200,000 a year.
“I don't think there's going to be any single item you can look at and say how it's going to affect the economy,” Lankford said.