U.S. payroll legislation
that cut the payroll tax rate to 4.2 percent—a 2 percent decrease from the original 6.2 percent—initially went into effect last year. In February, the payroll tax holiday was prolonged through the end of 2012, but the allowance is unlikely to extend to next year, according to The Hill.Theme emerges among Democrats
Although job creation is slowing (June marked the third consecutive month that fewer than 100,000 new positions were created), a theme emerging within the Senate Democratic Conference suggests that concerns are growing about the sustainability of the Social Security fund. Extending the current U.S. payroll tax compliance
allowance through the end of the year would cost an estimated $120 billion. As the media outlet explains, money from the general treasury has been used to replace the loss of revenue to the Social Security fund, which exacerbated the federal debt.
"The critics said, 'You'll never get rid of it,'" said Senate Democratic Whip Dick Durbin of Illinois on the payroll tax holiday, as quoted by the news source
. "And we said, 'No, it's going to come to an end.' In terms of whether we need more stimulus in our economy, I think we do. But in terms of using this against the Social Security trust fund, I think for credibility we have to keep our word."Some don't support ending the tax holiday
Not everyone agrees that it's time for the allowance to go. Senator Sherrod Brown, an Ohio Democrat, is advocating for an extension of both the reduced payroll tax rate and unemployment insurance. Senate Budget Committee Chairman Kent Conrad—a North Dakota Democrat—said decisions about extending the payroll tax cut should be contingent on the unstable European economic situation, while Joe Lieberman, an Independent who caucuses with Democrats, raised questions about how much of a positive effect the U.S. payroll tax legislation
had in the first place.
A White House official pointed out that there are other ways to provide tax relief to middle class families—for instance, extending Bush-era tax rates, as well as other measures, such as the Earned Income Tax Credit and the Child Care Tax Credit.