After years of protecting expensive tax cuts for the wealthiest Americans, many Republicans now say the government should let this middle-class tax cut expire.
Last year, President Obama and members of both parties in Congress cut the payroll tax for 155 million workers, putting money in their pockets. Now, that tax cut is expiring. So in September, the President and Vice President Joe Biden proposed extending that tax cut and cutting your taxes even further: giving the typical family a $1,500 tax cut. Steps like this won’t just help families feel more secure in their budgets, it’ll give them more money to spend at local businesses that will hire more people and make investments in new equipment too.
Today, because of the tax cuts, everyone who collects a paycheck contributes 4.2 percent of their wages in payroll taxes. But if Congress doesn’t act, that tax will go up two percentage points, to 6.2 percent. That might not sound like much, but to an average family, that’s a difference of almost $1,000 a year.
President Obama and Joe Biden have proposed cutting the rate even further – down to 3.1 percent. That would give a tax cut to 160 million workers next year, providing a $1,500 cut to the typical middle class family.
Social Security is a social insurance program that is primarily funded through dedicated payroll taxes called Federal Insurance Contributions Act tax (FICA). Tax deposits are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, or the Federal Supplementary Medical Insurance Trust Fund. To secure the safety of many the State should take care that enough money is attributed by those who can afford it.
Though the United States got deep rifts among House Republicans over a payroll tax break. Last Friday rank-and-file members of the caucus told their leaders that they did not want to extend the cut in Social Security taxes for another year, as demanded by President Obama. “Most people standing up to speak were troubled” by legislation to extend the payroll tax cut, said Representative Jeff Flake, Republican of Arizona. “There was a divide between the rank and file and the leadership. There was a lot of disquiet in that room.”
Republican leaders said they would address their members’ concerns, as part of a legislative package that would also include an extension of jobless benefits for the long-term unemployed and a measure to spare doctors from a 27 percent cut in their Medicare reimbursements, scheduled to go into effect on Jan. 1.
Social Security has been held harmless from the FICA holiday; the losses have been made up from general federal revenue. But extending the cuts further does muddy the water on Social Security’s self-funding feature.
To offset the cost of the payroll tax relief, the House bill would cut spending in some domestic programs and raise money by selling radio spectrum licenses.
The House Democratic leader, Nancy Pelosi of California, criticized these provisions as extraneous. Republicans “are taking a circuitous route to nowhere,” she said, and they appear to be in disarray because they are “feeling the heat” from Democrats who insist on extension of the payroll tax cut.
Congress is now shadow boxing about the payroll tax holiday that is set to expire at the end of this year. Currently, workers are getting a break equal to 2% of earnings up to the Social Security taxable maximum of $106,800. The temporary tax cut was part of a deal struck last year to extend the Bush tax cuts for two years. The payroll tax cut and unemployment benefits for the long-term unemployed were extended for only one year, presumably based on (unwarranted) optimism about the economic recovery, but the implosion of the Eurozone and the continuing overhang from the housing market collapse have kept the economy very weak. There clearly is need for continuing economic stimulus.
Social Security does face a long-term imbalance around the year 2035, when the SSTF will be exhausted; at that point, the program would have sufficient resources to pay only 77 percent of promised benefits – that’s the problem that needs fixing, but it has nothing to do with the federal government’s deficit spending according Reuters columnist Mark Miller.
Americans should not forget that sometimes people have to choose from both not such ideal situations and at such moment they should choose the best from the worse.
After years of protecting expensive tax cuts for the wealthiest Americans, many Republicans now say the Americans should let this middle-class tax cut expire.
There’s a lot at stake here for lots of families, and the better folks understand how much more they may have to pay, the easier it will be to get Congress to do the right thing. The government has put together a calculator to show how much of the people their money hangs in the balance.
- What Are Payroll Taxes?
- House G.O.P. Is Split on Extension of Payroll Tax Cut
- Payroll tax holiday isn’t perfect, but it’s better than nothing
- RELATED: Six ways the rich really do get richer
- Payroll tax cut: What about Social Security? (politicalticker.blogs.cnn.com)
In all the talk about whether to extend the Social Security payroll tax cut, a lot of the focus is on the economy: Will the recovery suffer if Congress lets it lapse?
Much less prominent in the discussion is the potential effect of the payroll tax cut on the Social Security trust funds.
- Why We Should Never Have Messed Around with the Payroll Tax (fdlaction.firedoglake.com)
When the payroll tax was first proposed last year I thought it was an inherently bad idea. While the economy needed a stimulus, it should never have taken the form of messing with the basic social contract that is the foundation of our social safety net.
- US Senate Dems,GOP Block Each Others Payroll TaxCut Extension (forexlive.com)
The Senate’s partisan stalemate on extending the
payroll tax cut continued with a vengeance Thursday as Republicans
blocked a Democratic plan and Democrats blocked a Republican plan.Under Senate rules, motions to consider the Democratic and
Republican payroll tax cut extension plans required 60 votes.The Senate Democratic plan got 50 votes while the Republican plan
got only 22 votes. Both fell well short of the requisite 60 votes.
- GOP leaders hope for agreement on payroll tax cut (goerie.com)
Republicans want to couple continuation of the Social Security payroll tax cut with a provision that would assure construction of an oil pipeline from Canada to Texas — a move Obama has said would lead to a veto.
- Payroll Tax Cut Boosts The Chances For Reform (forbes.com)
The chances of Congress rewriting the tax code next year—in the heat of election madness– are vanishingly small. However, top Democrats are not wrong about all of these factors eventually forcing reluctant lawmakers to tackle the tax code.And extending the payroll tax cut will only increase the pressure. Already, this tax break threatens to become another permanently temporary fixture in the law, like the Bush/Obama tax cuts and the dozens of allegedly time-limited business breaks that litter the code.
- Payroll tax cut conundrum (geneveith.com)
What would be the statesman-like thing to do, as opposed to the political-rhetoric thing to do?
- Why the payroll tax cut extension is best worst option (ibtimes.com)
The payroll tax cut has the advantage of immediacy. It puts money in workers’ pockets – $2,170 next year for a married couple filing jointly with $70,000 in gross income, according to White House estimates. That’s a meaningful tax break, especially in hard times. And, most of the cut would go to middle and low-income workers. That means most of the money likely will be spent, which is good for the economy.
- Why Obama’s payroll tax cut extension is the best worst option (ibtimes.com)
what’s good for the economy now could well be be bad for Social Security later.
The payroll tax actually is the line on your pay stub labeled FICA – the Federal Insurance Contributions Act. Although technically – and legally – a tax, the architects of Social Security always intended FICA as a premium payment
- Payroll tax cut: What about Social Security? (money.cnn.com)
Social Security is supposed to be a self-financed program that pays out benefits earned by those who paid into the system. But some worry the payroll tax cut could endanger that concept.
Blahous and others argue that the more Social Security is seen as a program that must rely on general tax revenue, the less it will be viewed as a self-financed program that pays out earned benefits.”Social Security will gradually be turned into something more akin to welfare, for which the funding is provided not solely by … workers but also by a subsidy funded by those subject to income tax,” Blahous said.
- Payroll tax holiday: Will it drain the Social Security Trust Fund?(csmonitor.com)
The bars in the chart at the right, drawn from the bowels of Treasury documents that account for monthly flows in and out of the Social Security trust funds (there’s one for the retirement program and one for the disability program), show the amount of the transfers through September.
There it is: evidence that the trust fund has been held harmless. This is not complicated stuff. If the tax cut is extended, the new legislation will carry the very same obligation.
The US economy is still fragile in lots of ways, but it’s also shown the slightest bit of momentum in recent weeks. Failing to extend the tax cut right now is thus bad macro and bad micro.
- When will it be a good time to raise the Social Security payroll tax? (quinnscommentary.com)
Some ideas to pay for extending and enlarging this tax break, and I use the term loosely, include raising airport fees, gasoline taxes or taxes on other parts of the economy. Even someone like me who got a C in Econ 101 can see the irony of this; raise the cost of gasoline… that should help the middle class.
- GOP Leaders Aim for Agreement on Payroll Tax Cut – Fox News (foxnews.com)
House Speaker John Boehner said Thursday he’s confident that Republicans are ready to move on legislation continuing a payroll tax cut, but the GOP remained on a collision course with President Obama over a side issue.Republicans want to couple continuation of the Social Security payroll tax cut with a provision that would assure construction of an oil pipeline from Canada to Texas — a move Obama has said would lead to a veto.