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When This Holiday's Over, Will Your Taxes Go Up?

If Washington's politicians can't reach a deal to avert the fiscal cliff, the temporary payroll tax cut passed two years ago as an anti-recessionary measure could evaporate - and with it, starting in January, a percentage of your take-home pay.

The payroll tax holiday cut the employee contribution from 6.8 percent of wages to 4.8 percent. That may not sound like much, but it adds up to $125 billion less in income for families, according to Michael Feroli, a JPMorgan economist.

Advocates on both sides of the debate about whether to extend the cut say they're championing middle America.

This past weekend, on F ox News Sunday, conservative political commentator William Kristol argued that "we have a collusion among the elites of both parties" and suggested that the GOP should be supporting an extension of the payroll tax holiday. "Republicans have a huge opportunity here to be champions of the working class and the middle class," said Kristol, the founder and editor of The Weekly Standard, "instead of screaming and yelling about millionaires."

AARP is among the organizations advocating a return to the higher rates. So far, the lost revenue has been paid back to the Social Security system by the U.S. Treasury. But AARP CEO A. Barry Rand and others say they are concerned about disrupting the connection between payroll taxes and the Social Security program.

"Further extension of the payroll tax holiday would undermine confidence in Social Security and put at risk the program's dedicated funding stream and the hard-earned benefits of millions of Americans and their families," Rand said.

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