Senate Democrats introduced a bill to extend and expand the payroll tax cut today, paying for it with a 3.25 per cent surtax on incomes over than $1 million.The measure, introduced by Sen. Bob Casey (D-PA), would lower the employer contribution from 6.2 per cent to 3.1 per cent for the first $5 million in wages — meant to help small businesses — and would allow the average American family to keep an extra $500 next year on top of the existing cut.
But Republicans, who are ambivalent about continuing the tax cut to begin with, are balking at the surtax, and are lining up to oppose the bill.
“Republicans have said that extending the payroll tax break is a potential area of common ground, but coupling it with a job-killing tax hike on small businesses makes no sense whatsoever,” said Michael Steel, a spokesman for Speaker of the House John Boehner. “It looks like Washington Democrats are playing politics with American jobs – again.”
Senate Majority Leader Harry Reid repeated the warning of President Barack Obama that failure to extend the tax cut could tank the economy, with Obama warning that over 500,000 jobs could be lost lost, with 0.5% cut from GDP.
Reid pledged to continue to press for the payroll tax cut extension/expansion if this version fails in a vote later this week, but refused to say what pay-fors Democrats would offer to cover the bill’s $255 billion price tag if the GOP blocks the millionaires surtax.
The White House once again called for Congress to pass the extension today, and President Barack Obama will travel to Scranton on Wednesday to promote the cut.
Here are some more details from the press release:
Key Provisions Of The Middle Class Tax Cut Act Of 2011:
- Provides Tax Cut to 160 Million Workers. The bill cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employees and the self-employed on their wages and salaries for 2012. Approximately 160 million workers will benefit from this tax cut, with the average family seeing nearly $1,500 in additional take-home pay.
- Cuts the Payroll Tax in Half for 98% of U.S. Businesses. The Senate bill cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employers on the first $5 million of taxable payroll for 2012. This will benefit all businesses, but 98% of businesses will see their portion of the Social Security payroll tax cut in half
- Gives an Added Incentive for Businesses to Hire New Workers. The bill completely eliminates (from 6.2% to 0%) the Social Security payroll tax paid by employers on the first $12.5 million of an employer’s increased taxable payroll for the 4th quarter of 2011 and $50 million in increased payroll for 2012.
- Asks Millionaires to Pay Their Fair Share Without Adding a Dime to the Deficit. In order to create or save hundreds of thousands of jobs and prevent a tax hike that would impact 160 million American workers, the Senate bill imposes a 3.25% surtax on modified adjusted gross income in excess of $1 million for both single filers and married couples filing jointly. The surtax is effective for taxable years beginning after December 31, 2012.
- Protects Social Security. The legislation would not affect the Social Security Trust Fund by one penny, because it requires that the Social Security Trust Fund be made whole through transfers from the General Fund.
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