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%.