How Many Workers in Each State Would Benefit from Extending the Payroll Tax Cut?

December 3, 2012 at 5:11 pm

Now that President Obama has made the payroll tax cut — which expires at the end of the month — part of the tax debate, let’s look at how many workers have a direct stake in extending it for one more year.  We estimate that more than 150 million workers would benefit, including large numbers in every state (see table).

And for most of these workers, the benefits are substantial:  half of them would receive at least $546.

Our estimates are based on 2010 and 2011 data, so they are conservative.  More workers would likely benefit as the economy continues to recover during 2013 and more people re-enter the workforce.

As we’ve explained, temporarily extending the payroll tax cut — or creating a tax break targeted even more toward people who will spend it, such as the 2009 Recovery Act’s Making Work Pay tax credit  — is much better value as economic stimulus than extending the high-income Bush tax cuts.  Goldman Sachs estimates that allowing the payroll tax cut to expire would slow next year’s economic growth rate by 0.6 percent.  And, because the payroll tax cut is temporary and wouldn’t add to deficits permanently, extending it for a year is the right thing to do for the economy in the long run.

Congressional support is also growing.  For example, Senate Budget Committee Chairman Kent Conrad (D-ND) backs an extension and Senate Finance Committee Chairman Max Baucus (D-MT) says it should be on the table in budget talks, along with extending another provision crucial to the recovery:  emergency federal unemployment insurance.

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More About Chye-Ching Huang

Chye-Ching Huang

Chye-Ching Huang is a tax policy analyst with the Center’s Federal Fiscal Policy Team, where she focuses on the fiscal and economic effects of federal tax policy. You can follow her on Twitter @dashching.

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