President Obama wanted Congress to make rich people pay more taxes. His goal was to make people making more than $250,000 a year pay more taxes. He finally agreed to a Republican plan to raise taxes on people making more than $450,000 a year.
For people making less than $450,000 annually, tax rates would stay the same.
However, tax reform did not stop there. Since 2009, the payroll tax that supports the Social Security system was reduced each year by two percent for all taxpayers. That helped millions of taxpayers pay their bills.
The tax reform program of 2013 ended that tax break. January found all taxpayers paying more in taxes, but low-income earners were hit particularly hard.
People have to work harder to make ends meet. For example, workers earning $30,000 a year will pay $600 annually more in taxes. For many families this may make a difference in their food budget. Their overall spending must be reduced.
Sales in chain stores have gone down. The confidence of lower-income shoppers has also gone down.
Economists say less spending is hurting the overall economy. One said, “If you wanted a policy to lower the spending of lower- and middle-income households, raising the payroll tax is the way to do it.”
Advocates say the Democrats did not do enough to continue the lower payroll taxes. The Treasury Secretary said, “I do not see any reason to support its extension.”