Although the Super-Committee was designed to fix the US’ long-term deficit issues, there are also some short-term economic matters embedded into it.
Notably: The Super-Committee was seen as a likely vehicle for extending the payroll tax cut that was agreed to a year ago.
Now that the Super-Committee is on the brink of failure, the prospect that every American is about to get slammed with a tax hike is even more real.
Back in September, the centre on Budget and Policy Priorities looked at the possible impact of a reversion to normal payroll taxes, and what it would mean for workers.
This table offers a nice breakdown of the impact on workers by profession.
And here’s a look at the breakdown based on family income…
As for the macro picture, Goldman has said that failure to extend the payroll tax credit could slice ~0.6% of of GDP growth next year.
It’s important to bear in mind, of course, that there’s still hope for an extension of it. It might be too politically dangerous for Republicans to pack up work for the year not having passed it. But the options are now narrower than they were while the Super-Committee was still a viable path.
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