Looking beyond the election to the expiring US payroll legislation
October 17, 2012
At the end of 2012, a range of tax breaks will expire and new spending cuts will be introduced. The expiring allowances include U.S. payroll tax legislation
that reduced the amount workers were required to pay from 6.2 percent to 4.2 percent—representing a deficit change of approximately $95 billion—and Bush-era tax cuts comprising a possible $221 billion deficit change.
As well as the U.S. payroll legislation
and the assorted tax cuts introduced by President George W. Bush, additional elements include the Medicare doctor payment cut ($11 billion), healthcare reform taxes ($18 billion), emergency unemployment insurance benefits ($26 billion), the tax extender expiration ($65 billion), the budget sequester ($65 billion) and other revenue/spending alterations ($105 billion). Together, the expirations and spending cuts could add up to a deficit change of as much as $606 billion, according to Seeking Alpha
A recent survey
by the Association for Financial Professionals revealed that three-quarters of executives who manage corporate finances are concerned about the potential effects of these developments, which are collectively referred to as the "fiscal cliff." Half (49 percent) said they were eager for Washington, D.C., to focus on implementing post-election changes with the goal of avoiding the fiscal cliff, and nearly two-thirds (63 percent) called for the federal government to resolve long-term fiscal and deficit issues. Other common requests included reducing regulatory complexity and uncertainty (42 percent), resolving political gridlock (37 percent), implementing corporate tax reform (33 percent), introducing policies that uphold the safety and soundness of the banking system (20 percent) and addressing foreign companies' anti-competitive practices (10 percent).
"Companies are looking beyond the elections," said AFP president and CEO Jim Kaitz. "The most important issue is resolving long-term fiscal and deficit issues."What does the fiscal cliff mean for workers?
Arguably the most immediate effect felt by the nation's employees will be in relation to the expiration of the payroll tax holiday. According to The Wall Street Journal
, the average family's tax bill will be cut by nearly $1,000 as a result, a total of approximately $120 billion for middle-income families.