September 30, 2014
September 2014, Dean Baker
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.
