Tuesday, February 7, 2012

Payroll Tax Break Brief

The most important issue affecting Congress at the moment is the payroll tax break and so I thought I would highlight some of the crucial aspects of this issue.
Certain legal provisions lapse in 23 days time. The following provisions have been extended already, and unless they are further extended, or a final solution is arrived at they will cease to have effect - which will have a big impact on some people.
They are:
* the Social Security tax break - which if not extended will increase the amount working people pay.
* jobless benefits.
* Medicare reimbursement rates.
In Congress you can add additional items to a bill - it is much greater than UK Parliament amendment rules would allow. It is a frequent practice to add to one bill, provisions apparently unrelated. These may even be known as "poison pills".
In this case the Republicans have been refusing to agree to a final bill without provisions permitting the Keystone XL pipeline.
Two different bills have passed - one from the Republican run House and the just-democratic Senate. So the bill is in "conference committee". The idea is that this committee will agree a compromise which both Houses can vote on - up or down.

  • Price tag over $180 billion.
  • Keeps this year's 4.2 percent Social Security payroll tax rate paid by 160 million workers through the end of 2012, instead of rising to 6.2 percent on Jan. 1.
  • Extends expiring benefits for the long-term jobless through 2012.
  • Prevents 27 percent cut in Medicare payments to doctors for 2012.
  • Blocks Obama administration rule curbing pollution from industrial boilers.
  • Requires President Barack Obama to approve the Keystone XL oil pipeline within 60 days.
  • Paid for by extending current pay freeze on civilian federal workers another year through 2013 and requires them to contribute more toward their pensions; raises fee Fannie Mae and Freddie Mac charge for insuring mortgages; raises Medicare premiums paid by higher-income elderly; cuts some health care overhaul law programs.

Senate bill:
  •  Price tag $33 billion.
  •  Extends 2-percentage-point cut in Social Security payroll tax through Feb. 29.
  •  Extends 2-percentage-point cut in Social Security payroll tax through Feb. 29.
  •  Renews benefits for the long-term unemployed at current levels through Feb. 29, no  other changes in program.
  •  Prevents 27 percent cut in Medicare payments to doctors; extends other health care fees through Feb. 29.
  • Same provision on Keystone as House.
  • Paid for by increasing home loan guarantee fees charged to mortgage lenders by Fannie Mae, Freddie Mac and the Federal Housing Administration by one-tenth of 1 percentage point.

It is politically imperative to both parties that they can come to a compromise. Crucially, the compromise has to have enough meat on it that both parties can claim it as a political victory in order to boost their party's electoral chances in November. At a time when Congress' approval rating is at an all-time low and Congress is considered by many to be broken, it's equally important that Congress is seen to be working on behalf of the American people.

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