Share “The Payroll Tax Divide”

Modified: December 11, 2011 at 12:24 am •  Published: December 11, 2011

Last year, Congress and President Barack Obama agreed to reduce the payroll tax that funds Social Security from 6.2 percent to 4.2 percent for a year, giving the average family $1,000 more in take-home pay. That cut is set to expire on Dec. 31.

Obama wants the tax cut extended for another year and he wants another extension of long-term unemployment benefits, which can last 99 weeks in some states.

Senate Democrats have proposed reducing the payroll tax to 3.1 percent for 2012. They would replace the money lost to the Social Security Trust Fund by imposing a 1.9 percent surcharge on income over $1 million. Their bill also includes an extension of unemployment benefits.

House Republicans have introduced a package that would retain the tax cut at 4.2 percent and replace the lost Social Security money by freezing federal worker pay, cutting some funding for the 2010 health care law and introducing more means testing in Medicare. They would also extend unemployment benefits, though they would gradually reduce the amount of weeks granted to 59 for most states.

The Republican bill also includes a provision that would require Obama to make a decision within 60 days on the proposed pipeline to carry oil from Alberta, Canada through Oklahoma to the Texas Gulf Coast.


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