The GOP Will Let Your Taxes Go Up, But Not a Dime More From Millionaires
In the wake of the super committee’s inability to reach an agreement because Republicans refused to make the wealthiest Americans pay their fair share, there are several very important items that Congress must deal with before leaving town for Christmas vacation. Today, we’ll take a look at the payroll tax cut for working Americans, but look out for more in this series including other must-pass items like an extension of long-term unemployment benefits.
Here’s the rundown.
WHAT: Currently, employees are receiving a 2 percent reduction in the “OASDI” portion of the payroll tax — in other words, employees are now paying just 4.2 percent instead of 6.2 percent. Employers are still paying their full 6.2 percent contribution. Since the tax funds Social Security, the lost revenues to the Social Security Trust Fund are being replaced with general funds from the U.S. Treasury.
HOW WE GOT HERE: The American Recovery and Reinvestment (i.e. the stimulus) included a Making Work Pay tax credit of up to $400 per worker or $800 per couple. During the late 2010 negotiations over extending the Bush tax cuts, Republicans made it clear they would not agree to extend this Obama tax cut. In return for extending the Bush tax cuts for the wealthy, Republicans eventually agreed to also include a payroll tax cut in lieu of extending the Making Work Pay tax credit. While less progressive than the Making Work Pay tax credit (which was refundable), the payroll tax cut still fulfills the important goal of providing extra cash to workers in every paycheck — cash that lower income workers in particular are likely to spend almost immediately, which will in turn stimulate the economy.
ON THE TABLE NOW: The Senate will take up a bill sponsored by Sen. Bob Casey (D-PA) this week that will both extend and expand the payroll tax cut. Here are the details:
- EMPLOYEES: The payroll tax cut for employees would be extended for one year and increased by more than 50 percent — meaning employees would pay just a 3.1 percent payroll tax next year (compared to 4.2 percent this year and the normal 6.2 percent rate).
- EMPLOYERS: Employers, who are currently paying the full 6.2 percent rate, would also see their contribution cut in half to just 3.1 percent for all of 2012 on their first $5 million of payroll. This limitation would still help 98 percent of businesses while avoiding needless giveaways to large corporations, which are already sitting on record amounts of cash.
HOW IT’S PAID FOR: As with the American Jobs Act as a whole and other portions of it voted on by the Senate, this plan would be financed with a small 3.25 percent surtax on millionaires for any income earned about $1 MILLION. In other words, millionaires will still pay Bush-era income tax rates on their first million dollars of income and will also still be able to use unfair tax loopholes to pay even lower rates on anything their earn from investments.
WHAT WILL HAPPEN IF IT DOESN’T PASS:
- Taxes will go up for 160 million Americans
- Taxes will increase by $1,500 for the typical American family
- “We’ll likely go into recession” because of the more than $100 BILLION that would suddenly be pulled from the economy, said Mark Zandi, chief economist at Moody’s Analytics
HOW IT WILL IMPACT YOU:
- Here’s a calculator to determine how much your own taxes will increase if Republicans block the president’s plan
- Here’s a map showing the average tax increase/cut for residents of your state
IN ONE SENTENCE: This week’s choice for Republicans could not be clearer: stand with the 99 Percent and do something to help the economy or stand with the 1 Percent even if that means hurtling us toward another recession.
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