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Payroll tax cut in limbo

By Kay Bell · Bankrate.com
Tuesday, December 20, 2011
Posted: 2 pm ET

OK. Extension of the payroll tax cut probably is not just in limbo, but dead for at least a while.

In a largely party-line vote today, the House voted to go to conference with the Senate to work out a deal to keep the 4.2 percent payroll tax rate in place.

As everyone knows by now, the Senate passed its own bill last week by an 89-to-10 margin to do just that and sent it to the House.

The Senate bill would keep the current rate, down 2 percentage points from the usual 6.2 percent rate, in place for two months.

But Republicans in the House, after their party's leadership first indicated that a short-term extension would be fine, now say the tax rate cut extension must be for a year.

The GOP House leaders refused to let the Senate bill come to a vote and instead allowed only a vote on a bill to force a House-Senate conference to work out the tax cut time frame. Senators, however, have left town and say they aren't coming back.

We're all going to get dizzy as the spinning of these votes plays out while the Dec. 31 deadline nears.

It's possible that one side will blink before the year ends.

Don't count on it.

Instead, be ready to see smaller paychecks in January.

If you're getting unemployment benefits, start looking for other ways to help pay your bills. Extension of these payments are about to end because Congress couldn't act.

And if you're a senior citizen, try not to get sick. The Medicare payment fix that was part of the Senate bill won't take effect since the House rejected that plan.

Then when the House and Senate convene for the second session of the 112th Congress, they'll have this fight all over again.

What do you think? Is the two-month deal that would allow for lawmakers to hash out differences by the end of February a good idea? Or do you think House Republicans are right in demanding a year extension now? Let me and other readers know.

And oh yeah, be sure to also call your lawmakers and let them know exactly how you feel about what they've done. You don't have to wait until election day on Nov. 6, 2012, to make your feelings known.

Follow congressional tax legislation and how it affects you by subscribing to Bankrate's free Weekly Tax Tip newsletter. And when the 2012 tax-filing season arrives in January, Bankrate's Daily Tax Tip newsletter will return, too. You can subscribe to one or both of the tax newsletters.

You also can follow me on Twitter at @taxtweet.

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2 Comments
Ray
December 28, 2011 at 1:19 pm

The payroll tax cut will do little or nothing, except put our social security in more debt.
irshelpftlauderdale.com

EIEIO
December 22, 2011 at 11:10 am

Reducing the only means of funding Social Security is the FICA or payroll tax and is not a way to help put people back to work. And here we have a Democrat president promoting this for another two more months. And Senate Republicans went along with this joke. We just had one year of this and it did not create more jobs. So for 75 years now we've heard Republicans want to hurt seniors and have them live on dog food by cutting Social Security. When it is the Democrats all along that want that. President Clinton (Democrat) began taxing Social Security payments during his reign. Now Obama is short-funding the Social Security Trust Fund. Wow, the truth is being revealed.

As to the two-month extension of reductions in FICA/Payroll tax on wages. It will probably take two months to get this thing up and working in computer payroll systems and then what? Jake Tapper reporter (ABC I think) brought this up.

The whole thing is a travesty. Cut future increases in budget spending now of wasteful programs and government agencies. It is estimated that we have a 3.5 TRILLION budget yearly. This is unsustainable as there are about 2 TRILLION in yearly receipts.