Fiscal Cliff Deal Cuts Average Workers' Paycheck By $1,000

payroll tax hike with fiscal cliff deal
payroll tax hike with fiscal cliff deal

The tax package that Congress passed in the final hour of New Year's Day will protect 99 percent of Americans from an income tax increase, but almost every person will still see a hit to their paychecks.

That's because the legislation did nothing to prevent a reduction in the Social Security payroll tax from expiring. Social Security is financed by a 12.4 percent tax on wages, with employers paying half and workers paying the other half. That was reduced to 4.2 percent in 2011 and 2012, saving a typical family about $1,000 a year. In the deal, that tax break -- always intended as a temporary tax holiday -- was allowed to expire.