Americans’ paychecks may shrink next year

Americans’ paychecks may shrink next year, at least temporarily, even if Congress decides not to let tax rates rise.

Unless Congress votes by November to extend tax cuts enacted under President George W. Bush, the Internal Revenue Service will advise employers to increase deductions from paychecks beginning Jan. 1, payroll experts said.

The reason: The IRS needs time to prepare and distribute tables used to calculate withholding taxes, and employers need time to implement them. Even though the Bush-era tax cuts don’t expire until Dec. 31, the bureaucracy has to act sooner.

“It could be a paycheck or two until the new tables are implemented,” if the IRS notices come later than November, said Scott Mezistrano, senior manager of government relations at the American Payroll Association in Washington. Last year, payroll departments were alerted in November, Mezistrano said.

The political debate over extending the tax cuts, enacted in 2001 and 2003, is intensifying as Nov. 2 congressional elections approach.

President Barack Obama and most Democrats want the tax cuts extended for middle-income earners and to expire for the wealthiest Americans, the top 2 or 3 percent of earners. Obama, in a Rose Garden address today, said the administration has set its “sights on policies that grow the middle class and provide a ladder for those who are struggling to join it.”

Republicans want the cuts extended for everyone, arguing that raising taxes for any income bracket makes little sense during a recession.

Income Rates Revert

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