Neither party wants to raise income taxes on the middle class, which has come to be defined as families making below $250,000.
But for workers in that income group, there’s an equally if not more valuable tax cut that expires at the end of this year: the payroll tax cut.
If it expires, it would reduce workers’ paychecks by $115 billion next year, according to the Tax Policy Center…
“With the White House clearly holding the trump cards, we think a fiscal cliff deal could include … a compromise that might raise the payroll tax from 4.2% now to something like 5.2% — but not all the way back to the previous 6.2% rate,” Greg Valliere, chief political strategist at the Potomac Research Group, said in a research note.
Sean West, the U.S. policy director at the Eurasia Group, is less convinced. “It’s certainly possible that it gets extended, but I’m still betting against it. It’s something the president put in there to barter away,” he said.
Steve Bell, the senior director of economic policy at the Bipartisan Policy Center, also thinks a payroll tax cut extension is unlikely. But, he said, “some other form of short-term taxpayer help is likely.”