A State-by-State Look at the President’s Payroll Tax Cuts for Middle-Class Families 

An Analysis by the U.S. Department of the Treasury’s Office of Tax Policy 

The bipartisan Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 

2010 included several specific tax cuts and initiatives designed to spur economic growth and job 

creation. One important component of the Act was a reduction in the employee Social Security 

tax rate from 6.2 percent to 4.2 percent of the first $106,800 of taxable wages received in 2011. 

On December 17, 2010, President Obama signed this Act into law. The payroll tax cut is 

providing substantial benefits to working families and the economy throughout 2011. Some of 

the highlights are: 

 $109 billion in overall tax relief: The payroll tax cut is providing an estimated $108.6 billion 

in tax relief throughout 2011 to working Americans. 

 Tax cut for 159 million workers: The payroll tax rate cut has resulted in an estimated 158.9 

million working Americans receiving larger paychecks in 2011. 

 A tax cut of about $1,000 for a typical family: For a family with wages or salaries of $50,000 

per year, about the median household income, the payroll tax cut equals $1,000. 

 No effect on Social Security solvency: The legislation provided that the Social Security Trust 

Fund be made whole by transfers from the General Fund. Thus, the reduction in Social 

Security taxes paid by employees had no effect on the Social Security Trust Fund and no 

effect on individuals’ current or future Social Security benefits. 

Table 1, below, shows the number of beneficiaries from the payroll tax cut and the total increase 

in after-tax income received by the residents of each state. 

The President signed into law a 2 percentage point payroll tax cut for 2011 that is providing: 

 A tax cut of about $1,000 for the typical American working family in 2011. 

 A total of $109 billion in tax relief to support economic growth and job creation in 2011. 

Expanding this to a 3.1 percentage point tax cut for 2012, as President Obama has proposed, 

would provide: 

 A tax cut of about $1,550 for the typical American working family in 2012. 

 A total of $179 billion in tax relief to support economic growth and job creation in 2012. 

 A boost of around 2 percent or more to the after-tax income of workers who are most 

likely to spend their additional after-tax income – leading to greater demand, stronger 

growth, and job creation. 

The current 2 percentage point payroll tax cut is providing a significant benefit to workers in 

every state in 2011, and this report shows the substantial tax relief expected to go to workers 

in each state if the payroll tax cut is extended and expanded to 3.1 percentage points in 2012. 
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Without Congressional action by the end of the 2011 calendar year, the 2 percentage point 

payroll tax cut the President signed into law will expire. If the payroll tax cut is allowed to 

expire, taxes will increase substantially for nearly every middle-class working American family, 

and economic growth and job creation will be significantly slower in 2012 as a result. 

On September 8, 2011, President Obama proposed the American Jobs Act (AJA) of 2011, a fully 

paid-for initiative to boost economic growth and create jobs. One provision in the AJA extends 

and expands the 2011 payroll tax provision, cutting the employee Social Security payroll tax rate 

in half from 6.2 percent to 3.1 percent of the first $110,100 of taxable wages received in 2012. 

Some of the highlights are: 

 $179 billion in tax relief: The payroll tax rate cut proposed in the American Jobs Act is 

expected to provide $178.8 billion in tax relief to working Americans throughout 2012. 

 Tax cut for 161 million workers: The payroll tax cut would result in an estimated 161.2 

million working Americans receiving larger paychecks in 2012. 

United States 158.9 108.6

Alabama 2.3 1.4 Massachusetts 3.5 2.7 South Dakota 0.5 0.3

Alaska 0.4 0.3 Michigan 5.1 3.3 Tennessee 3.2 2.0

Arizona 2.9 2.0 Minnesota 3.1 2.2 Texas 11.4 7.7

Arkansas 1.5 0.8 Mississippi 1.4 0.8 Utah 1.3 0.8

California 16.7 12.6 Missouri 3.1 1.9 Vermont 0.4 0.3

Colorado 2.5 1.7 Montana 0.6 0.3 Virginia 4.3 3.3

Connecticut 2.0 1.6 Nebraska 1.1 0.7 Washington 3.5 2.7

Delaware 0.5 0.4 Nevada 1.2 0.8 West Virginia 0.9 0.5

Florida 9.0 5.6 New Hampshire 0.8 0.6 Wisconsin 3.2 2.1

Georgia 4.6 3.0 New Jersey 4.7 4.1 Wyoming 0.3 0.2

Hawaii 0.7 0.5 New Mexico 0.9 0.6 DC 0.4 0.3

Idaho 0.8 0.5 New York 10.1 7.8 Puerto Rico 

Other Areas

1.2

3.0

0.5

1.4 Illinois 6.5 4.6 North Carolina 4.7 3.0

Indiana 3.6 2.3 North Dakota 0.4 0.2

Iowa 1.7 1.1 Ohio 5.8 3.5

Kansas 1.6 1.0 Oklahoma 1.9 1.1

Kentucky 2.2 1.3 Oregon 1.9 1.3

Louisiana 2.1 1.3 Pennsylvania 6.7 4.7

Maine 0.8 0.4 Rhode Island 0.6 0.4

Maryland 3.2 2.6 South Carolina 2.2 1.3

11-29-2011

(Millions of People/Billions of Dollars)

Table 1. State-by-State Estimates of the Tax Relief Provided by

The 2.0 Percentage Point Cut in the Employee Payroll Tax in 2011

State designation is based on employee residence.

The figures in the table are based on tabulations from the 2008 Social Security Administration, Continuous Work History Sample, 1 percent 

sample and the Department of Treasury's Office of Tax Analysis estimate of the number of people benefitting in 2011. 
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 A tax cut of more than $1,500 for a typical family: For a family with wages or salaries of 

$50,000 per year, about the median household income, the proposed 3.1 percentage point 

payroll tax cut equals $1,550. 

 No effect on Social Security solvency: Similar to the payroll tax rate cut enacted in 2010, 

under the American Jobs Act, the Social Security Trust Fund would be made whole by 

transfers from the General Fund. Thus, the reduction in Social Security taxes paid by 

employees would have no effect on the Social Security Trust Fund and no effect on 

individuals’ current or future Social Security benefits. 

Table 2, below, shows that workers all across America would benefit from the payroll tax rate 

cut contained in the American Jobs Act. The table also shows the total increase in after-tax 

income that will accrue to residents of each state. 

United States 161.2 178.8

Alabama 2.4 2.3 Massachusetts 3.5 4.5 South Dakota 0.5 0.4

Alaska 0.4 0.4 Michigan 5.2 5.5 Tennessee 3.3 3.2

Arizona 3.0 3.2 Minnesota 3.2 3.7 Texas 11.6 12.8

Arkansas 1.5 1.3 Mississippi 1.4 1.3 Utah 1.4 1.4

California 17.0 20.7 Missouri 3.1 3.1 Vermont 0.4 0.4

Colorado 2.5 2.9 Montana 0.6 0.5 Virginia 4.4 5.4

Connecticut 2.0 2.6 Nebraska 1.1 1.1 Washington 3.5 4.4

Delaware 0.5 0.6 Nevada 1.2 1.2 West Virginia 0.9 0.9

Florida 9.1 9.3 New Hampshire 0.8 1.0 Wisconsin 3.2 3.5

Georgia 4.7 5.0 New Jersey 4.8 6.7 Wyoming 0.3 0.4

Hawaii 0.7 0.8 New Mexico 0.9 0.9 DC 0.4 0.6

Idaho 0.8 0.7 New York 10.3 12.8 Puerto Rico 

Other Areas

1.2

3.0

0.8

Illinois 6.6 7.6 North Carolina 4.8 5.0 2.3

Indiana 3.7 3.7 North Dakota 0.4 0.4

Iowa 1.8 1.8 Ohio 5.8 5.8

Kansas 1.6 1.7 Oklahoma 1.9 1.9

Kentucky 2.2 2.1 Oregon 2.0 2.1

Louisiana 2.2 2.2 Pennsylvania 6.8 7.8

Maine 0.8 0.7 Rhode Island 0.6 0.7

Maryland 3.2 4.3 South Carolina 2.3 2.2

11-29-2011

State designation is based on employee residence.

The figures in the table are based on tabulations from the 2008 Social Security Administration, Continuous Work History

Sample, 1 percent sample and the Department of Treasury's Office of Tax Analysis estimate of the number of people 

benefitting in 2012.

Table 2. State-by-State Estimates of the Tax Relief Provided by

The 3.1 Percentage Point Cut in the Employee Payroll Tax in 2012

(Millions of People/Billions of Dollars)
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Payroll tax rate cuts tend to provide the largest proportional benefits to middle-class families 

who are at or below the Social Security tax wage cap of $110,100 for 2012. The payroll tax cut 

proposed in the American Jobs Act for 2012 provides relatively large benefits to workers who 

are most likely to spend their additional after-tax income. Increasing middle-class families’ 

disposable incomes leads to greater demand, stronger growth, and job creation. 

 Payroll taxes are capped at $110,100 of wages in 2012: Because of the cap on wages and 

salaries subject to the Social Security payroll tax, cutting the payroll tax rate provides tax 

relief that is concentrated on low- and middle-income working families. According to 

analysis by Treasury’s Office of Tax Policy: 

o The President’s proposed payroll tax cut is expected to reduce total Federal taxes paid 

by families in the lowest quintile by 32.3 percent, while those paid by families in the 

highest quintile are reduced by 5.1 percent and those paid by families in the top 1 

percent of the income distribution by just 0.9 percent. 

o Lower and middle income families will receive a boost to their after-tax income of 

around 2 percent or more, which will translate directly into greater demand for goods 

and services by these households. 

 Low- and middle-income families have a higher propensity to spend additions to their aftertax income: The Congressional Budget Office and other independent, nonpartisan economists 

have found that tax cuts targeted toward low- and middle-income families will generate 

stronger near-term growth more effectively than tax cuts for high-income taxpayers who tend 

to save rather than spend additions to their after-tax income. 

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