Last December, following much discourse and dissension, Congress finally managed to hammer out a two-month extension of the U.S. payroll legislation
that gave taxpayers a 2 percent payroll tax cut. The Temporary Payroll Tax Cut Continuation Act of 2011 was finalized just two days before the decreased rate was set to expire at the end of the year, which gave lawmakers time to formulate a more far-reaching U.S. payroll tax compliance
In February, an agreement was made to keep payroll taxes at the current 4.2 percent level on wages up to $110,100 through the end of 2012. As October commences and the leaves begin to turn—a sure sign that the end of the year is approaching—questions are being raised about whether another extension is in the offing, an idea most dismiss as unlikely.U.S. payroll tax legislation extension unlikely
As The New York Times
notes, Treasury secretary Timothy Geithner recently stressed the temporary nature of the U.S. payroll tax legislation
while testifying before the Senate Budget Committee. Similarly, the White House has shown no indications that it is pushing for an extension, even as lawmakers begin to meet privately about tax extenders and the impending fiscal cliff, according to congressional aides cited by the National Journal Daily
. Indeed, support for the continuation of the tax cut has grown tepid even among the Democrats who championed the bill's initial passage, and House Minority Leader Nanci Pelosi has gone on record saying she believes the measure should be allowed to expire, the Times notes.
The news source offers a two-pronged explanation for the waning support of the payroll tax holiday.
"First, both Democrats and Republicans would rather focus on the broader political and economic issue of the fate of the Bush-era income tax cuts," according to the media outlet. "Second, though the economy has not become significantly stronger over the past year ... independent economists say that the economy could shoulder the payroll tax increase without undue harm."
That said, an April report by Michael Feroli, the chief U.S. economist for JPMorgan Chase, estimated that ending the payroll tax holiday would result in a $125 billion hit to the economy in 2013, Politico
notes. This, in conjunction with the expiration of the Bush-era rates and cuts to defense and domestic programs, could result in another recession, according to the nonpartisan Congressional Budget Office.