However, the new law does not continue the reduction in payroll taxes. This means 77 percent of working households will pay more to social security. The rate goes from 4.2 percent of wages to 6.2 percent. For a worker with an income of $35,000 there will be a tax increase of $700.
The following important tax benefits for lower-income families were renewed for five years:
- The Child Tax Credit will still pay up-to $1,000 per child to lower-income families.
- The Earned Income Tax Credit will continue to pay up-to $5,900 to qualifying families.
- Unemployment benefits will continue for about two million workers out of jobs.
Lower-income working families were mostly spared by the changes in the tax code. However, many state programs provide benefits in addition to federal benefits. Changes by state and local governments will have a great impact on workers’ incomes.