By now, most people have probably received their first paycheck of the year and have seen the effect of the expiration of the payroll tax holiday. As part of the economic stimulus packages during the throes of the Great Recession, the powers that be decided that giving a temporary break would help the economy. Most Americans contribute 6.2% of their paycheck toward the Social Security Fund, and this was cut to 4.2% throughout 2011.
For someone making $52,000 per year, this resulted in additional take home pay of roughly $1,000 per year, with the hope being that Americans would spend that money, injecting spending into the economy. Spending which, at that point, had been dramatically slowed.
At the end of 2011, the payroll tax holiday was extended for an additional 12 months, so Americans now had two years of extra spending money.
This is good and bad.