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Entries in Payroll Tax Cuts (4)

Thursday
Feb162012

Payroll Tax Cut Extension Could Give Consumers $85/Mo.

ABC News(WASHINGTON) -- Thanks to the payroll tax cut renewal, a worker could continue to get another $85 a month.

The House and Senate reached an agreement late Wednesday night on legislation to renew the two percentage-point cut in the payroll tax, which was set to expire at the end of this month, as well as jobless benefits for millions of unemployed Americans.

The deal could be passed off for a vote in the House and Senate this week.

“For working families facing tight budgets, this can make a real difference in paying for groceries, school supplies, and the monthly rent or mortgage payment,” Gary Burtless, economist with the Brookings Institution, said. “If Congress had allowed the payroll tax cut to lapse, these families would have immediately felt the squeeze of a smaller paycheck.  Many would have cut their spending, slowing the pace of the current recovery.”

For a worker or family earning $50,000 a year in wages, the payroll tax cut reduces Social Security tax withholdings by $1,000 a year, he said. This boosts after-tax income by about $85 a month.

For families further up the income ladder, it is less clear whether they would see such an immediate impact of letting the payroll tax cut end, Burtless said.

“These families do not live from paycheck to paycheck.  They may be using the tax cut to pay off old credit card bills or add to their saving,” he said, adding that many affluent workers have jobs that depend on selling products and services to families who are in tight economic circumstances.

Most of the major pieces of the legislation that were disputed are a continuation of current law, including the rates doctors are paid by Medicare, so they go into effect immediately.  There will also be a reduction in the maximum unemployment benefits to 73 weeks from 99 for those hardest hit. Some of the policy changes associated with what is rumored to be the spending offsets will require time to implement, according to J.D. Foster, senior fellow in the economics of fiscal policy at the Heritage Foundation.

Officials have estimated that another 10-month extension of the payroll tax cut may cost the Treasury about $100 billion.

Copyright 2012 ABC News Radio

Saturday
Dec312011

President Aims to Remain Working Class Warrior in 2012

JIM WATSON/AFP/Getty Images(WASHINGTON) -- The president will continue to claim the mantle for “warrior of the working class” in 2012 in stark contrast to the public perception that Republicans in Congress are backing millionaires, not the middle class, a senior White House official tells ABC News.

And that message will be carried through President Obama’s reelection campaign next year. “We’re going to be doubling down on our commitment and our message in terms of fighting for the middle class,” Deputy Press Secretary Josh Earnest told reporters covering the president in Hawaii.

After a heated battle between the White House and House Republicans, the payroll tax cut was extended until the end of February — a battle the president ultimately won albeit for just two months. It also delayed the president’s vacation here, but the White House official noted that it gave the president and his senior advisers time to work through policy proposals that they plan to roll out in the new year —  one being to extend the payroll tax cut through the end of 2012.

Extending it through the end of 2012 is a “must-do item of business” on the president’s Congressional agenda. “I think the president still has a strong hand on the payroll tax,” observed Rick Klein, senior Washington editor for “World News with Diane Sawyer.”  ”It’s going to be hard not to extend it for a year, politically.”

Copyright 2011 ABC News Radio

Thursday
Dec222011

Unemployment Benefits Extended Along With Payroll Tax Break

Spencer Platt/Getty Images(WASHINGTON) -- The payroll tax break compromise now up for a vote on Friday also extends unemployment benefits, but they may not be what the hardest hit need.

The five million people who would have lost unemployment benefits next year would likely benefit from job training more than anything, Welch Consulting’s chief economist Stephen Bronars, said.

“Job openings are way up and layoffs are down but people out of work are having a hard time finding it,” Stephen Bronars, chief economist with Welch Consulting said. “The people who have the least skills in vocation don’t really match up with the jobs advertised. Those people are having a really hard time.”

Bronars said extending their benefits might not be the best way to get those people re-trained and into advertised jobs.

With just nine days before a payroll tax break for 160 million Americans was set to expire, President Obama had been pressuring House Republicans to pass a two-month extension bill of the payroll tax cut, which is added pocket money for the employed. Americans, on average, would have lost about $40 per paycheck if the tax cuts had expired.

The Labor Department said 1 million unemployment claimants would have been affected in January alone. Now, Congress is expected to vote in favor of emergency unemployment compensation, a federal temporary extension of unemployment compensation for unemployed individuals who have already collected all regular state benefits.

In 2009 and 2010, Congress passed bills extending unemployment insurance for those out of work longer than six months, helping 17 million people, the Labor Department said. Last year, a bi-partisan compromise prevented seven million Americans from losing these benefits in 2011.

There are approximately 13.9 million people in the country who are currently out of work, many of whom receive a combination of federal and state unemployment benefits. State unemployment insurance, often funded with federal support, would have been affected if the emergency funding expires.

California’s Employment Development Department (EDD) reported Wednesday that 100,000 people would have stopped receiving biweekly benefits through the “Fed-Ed” program, which provides up to 99 weeks of support of up to $450 a week for the long-term unemployed in the state, the LA Times reported.

Unemployment figures, meanwhile, show significant decreases in those who say they are not working.

The number of people applying for unemployment benefits dropped last week to its lowest level since April 2008, the Labor Department reported on Thursday. First-time applications for unemployment benefits fell 4,000 to a seasonally adjusted 364,000, the third straight weekly drop.

The unemployment rate fell in November to 8.6 percent as the economy added 120,000 new non-farm jobs, the U.S. Labor Department reported earlier this month.

Copyright 2011 ABC News

Tuesday
Dec202011

Payroll Tax Showdown: What It Means to You

Steve Cole/Getty Images(WASHINGTON) -- Since a bipartisan bill to extend the payroll tax cut that passed the Senate on Saturday is expected to fail in the House Tuesday, lawmakers in Washington are gearing up for what could be a Christmas fight over how to avoid giving the average American a lousy gift for the New Year: a $1,000 tax hike.

While both parties have already agreed that the one-year cut should be extended, the political fight revolves around how to pay for the $112 billion tax cut, which went unfunded last year and which both parties have vowed will not add to the deficit this time around.

If the temporary holiday is allowed to expire, as it is set to do on Jan. 1, every worker would see their payroll taxes, which fund Social Security, increase by 2 percentage points to 6.2 percent, meaning Uncle Sam would take an extra $1,000 from a worker who earns $50,000 in 2012.

“If it doesn’t happen, every paycheck in the country will go down on Jan. 1,” said Chuck Marr, the director of federal tax policy at the Center for Budget and Policy Priorities. “It’s real money.  Every person you see every day has a thousand dollars less money.  That’s a lot of bucks.”

Because payroll taxes are only collected on the first $106,800 of income, cutting the rate has the greatest impact on low and middle income earners -- groups that tend to spend the largest proportion of their income.

“With the payroll tax cut, what is really at stake here is deciding whether or not to infuse $120 billion of disposable income into the economy in 2012,” said Andrew Fieldhouse, a federal budget policy analyst at the Economic Policy Institute.  “It’s not the best way to create jobs, but it is the biggest jobs measure being considered by Congress.”

Both Republicans and Democrats agree that raising taxes on middle and low income earners is a bad idea in the midst of an anemic economic recovery.  But the jury is still out on how big of an effect extending the current tax break will have on stimulating growth.

Republicans argue that the payroll tax cut shouldn't be funded with a tax increase that would be leveled at job creators, especially when the cut's stimulative effect is debatable. Democrats claim it is necessary to keep the economy growing.

Copyright 2011 ABC News Radio







ABC News Radio