Geithner Touts Start of Payroll-Tax Holiday

Nov. 23: U.S. Treasury Secretary Tim Geithner speaks at the financial stability oversight council (FSOC) meeting at the Treasury Department in Washington. (Reuters)

WASHINGTON—The Treasury Department Friday touted the start of a temporary payroll-tax holiday that will cut taxes for workers by $110 billion this year.

The payroll-tax cut, part of bipartisan tax legislation signed last year, will lower Social Security taxes by $700 on average for U.S. workers, Treasury Secretary Tim Geithner said during a press briefing at the White House.

But many low to moderate-income households have seen paychecks shrink in the first weeks of 2011, despite the new payroll-tax cut.

That's because a separate tax credit, the so-called Making Work Pay credit, expired at the end of 2010. That credit, which was President Barack Obama's signature tax and stimulus policy, gave a larger share of benefits to low and middle-income households.

By contrast, under the new law, a married couple with combined income of $250,000 could see their taxes cut by $4,200 this year.

The measure temporarily lowers Social Security payroll taxes paid by employees to 4.2% of earnings, from 6.2%.

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