In 2012, Congress approved a temporary
U.S. payroll tax legislation change—more colloquially known as a payroll tax holiday—that reduced the payroll tax rate from 6.2 percent to 4.2 percent, translating to a nearly $1,000 tax bill reduction for the average American family. This time last year, the Democratic Party was fighting to extend the
U.S. payroll legislation through 2012, claiming that the economy still needed a boost and many Americans still needed the temporary stimulus to put extra money in their pockets that would help make ends meet.
Lawmakers managed to pass the two-month Temporary Payroll Tax Cut Continuation Act of 2011 just eight days before last year's allowance expired, then subsequently extended the tax holiday through the end of the year in February. As the end of the year looms, the tax cut is again up for extension, but legislators seem far less enthusiastic this time around, despite the fact that the expiration is one of the factors affecting the widely-publicized, impending "fiscal cliff."
Expiration of "explicitly temporary" measure imminent "There are many tax provisions that are expiring at the end of the year and the president has said that the payroll tax cut, among others, should be on the table," noted Alan Krueger, chairman of the White House Council of Economic Advisors, during a
recent unexpected appearance at the daily White House press briefing.
Krueger underscored the need for the cuts to expire at some stage by making the point that they were "explicitly temporary."
Among many lawmakers who supported extending the holiday last time it was due to expire, the mood has cooled from staunch advocacy to a more non-committal attitude. For instance, Iowa Democratic Representative Dave Loebsack said that while he worried about the effect of the expiration on the economy and job creation, he was "also concerned with preventing middle-class and working-family tax increases while protecting Social Security and Medicare and ensuring the deficit is dealt with in a meaningful way," as
quoted by the Quad-City Times.
Indeed, a further extension would have to be financed by the Social Security trust fund or else added to the already sky-high deficit.
