RUNNING IN THE RED RUNNING IN THE RED Households with two paychecks each topping $100,000 stand to be the biggest winners from a proposed payroll tax cut under the agreement between the White House and congressional Republicans. The proposal to reduce the Social Security payroll tax for employees by 2 percentage points for one year means that those households would get as much as $82 more each week in after-tax income. By contrast, a single worker earning $10,000 would pocket less than $4 a week. "This is nothing more and nothing less than cash in the pockets of workers," says Clint Stretch, an expert at Deloitte Tax. Cutting the payroll tax was suggested recently by two bipartisan deficit-reduction panels, even though the new proposal would raise the deficit by $120 billion in 2011. The proposal would affect about 155 million workers. The savings would show up in workers' paychecks as a result of lower withholding by employers. Rather than paying 6.2% of their wages for Social Security, they would pay 4.2%. A worker earning $50,000 would save $1,000. Anyone earning above the current $106,800 wage cap would save $2,136. President Obama said Tuesday that putting $120 billion more into the economy next year would help economic growth and job creation. How much is unclear. "I think the payroll tax holiday will have an impact" on growth and jobs, Obama said during a press conference held to defend his compromise plan. Jared Bernstein, Vice President Biden's chief economist, calls it "real money that will help strapped working families and, once they pump it back into the economy, will create more jobs." Both sides would have something to brag about if the payroll tax for employees is slashed: • Republicans would get another across-the-board tax cut on top of the broader tax cuts passed in 2001 and extended under the deal through 2012. All workers would benefit, regardless of income. •Democrats could claim the benefit is greatest for middle-class workers, because it affects income only up to $106,800. Wealthy taxpayers would get the same tax break as those earning that amount. "Paychecks will be a little bit larger — very much larger for some people," says Roberton Williams of the non-partisan Tax Policy Center. If there's a clear loser in the deal, it's the deficit. The entire agreement would boost red ink by about $900 billion, the White House acknowledges. That could send the national debt soaring past $15 trillion. The Social Security Trust Fund, which already pays out more in benefits than it raises in taxes, would lose $120 billion in payroll taxes. The money would be replaced by the Treasury with more government IOUs. Even then, by 2037 the trust fund would lack the assets needed to pay all the benefits promised to Americans 67 and up, requiring an immediate 22% benefit reduction. Seniors groups worry that the tax cut won't be temporary and Social Security will become more reliant on deficit financing, rather than employment taxes. "Even though Social Security contributed nothing to the current economic crisis, it has been bartered in a deal that provides deficit-busting tax cuts for the wealthy," said Barbara Kennelly, president of the National Committee to Preserve Social Security and Medicare. "Diverting $120 billion in Social Security contributions for a so-called 'tax holiday' may sound like a good deal for workers now, but it's bad business for the program that a majority of middle-class seniors will rely upon in the future." When Obama signed last year's $814 billion economic stimulus law, he insisted on an income tax cut of up to $400 for individuals and $800 for couples. That tax cut was applied for two years but was not scheduled to be renewed in 2011. The payroll tax cut will be about twice that size in terms of overall spending. But for individuals making less than $20,000 and couples making less than $40,000, it's not as good a deal, because their savings wouldn't reach $400 or $800. Obama's bipartisan fiscal commission last week recommended cutting the payroll tax for employees as part of its long-term plan for deficit reduction. A task force of the Bipartisan Policy Center went further last month, suggesting that the entire 12.4% payroll tax paid by employers and workers be eliminated for a year, at an estimated cost to the Treasury of $650 billion. The payroll tax was instituted in 1937 at a combined 2% rate. It has risen over the years to keep Social Security solvent, reaching 12.4% in 1990. The cap on taxable earnings, which began at $3,000, now rises annually. Nearly two-thirds of taxpayers pay more in payroll taxes than income taxes, according to the Tax Policy Center. That takes into consideration the employer share, which tends to hold wages down. Among workers, the figure is even higher: 86% pay more in payroll taxes than income taxes. Guidelines: You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. You share in the USA TODAY community, so please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Use the "Report Abuse" button to make a difference. Read more