Frequently Asked Questions
Guidelines for Citing BEA Information | ID: 956 | Created: Feb-28-2011
The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 temporarily reduced the social security contribution rate for employees and the self-employed by 2.0 percentage points for 2011 (informally referred to as a “payroll tax holiday”). The social security contribution rate for employees was reduced from 6.2 percent to 4.2 percent, and the contribution rate for self-employed workers was reduced from 12.4 percent to 10.4 percent. Because personal contributions for government social insurance are a subtraction in the calculation of personal income, these changes boosted personal income and disposable personal income for January 2011 by $107.0 billion at an annual rate.
The January change in disposable personal income was also affected by the impact of the expiration of the Making Work Pay Credit provision of the American Recovery and Reinvestment Act of 2009 on withheld income taxes. Because personal current taxes are a subtraction in the calculation of disposable personal income, the expiration of this federal income tax credit reduced disposable personal income for January 2011 by $38.6 billion at an annual rate.
The net effect of these two sets of changes (the payroll tax holiday and the expiration of the income tax credit) was to boost January 2011 disposable personal income by $68.4 billion.
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