Taxes Blog

Finance Blogs » Taxes Blog » Payroll tax cut extension nearer

Payroll tax cut extension nearer

By Kay Bell ·
Tuesday, February 14, 2012
Posted: 3 pm ET

The good news for workers enjoying the temporary 2 percentage point payroll tax cut is that it looks like the lower tax is closer to being extended for all of 2012.

The House Republican leadership has offered to support the extension without finding money from elsewhere to pay for the $100 billion it will cost the U.S. Treasury.

The move indicates that the GOP doesn't want to deal with the bad PR it encountered in December when it held up the tax cut extension then.

But as we're talking about Congress, there's also some bad news. It's not certain that House Democrats will accept the proposal.

Democratic leadership prefers to keep the reduced payroll tax, which is the portion workers pay into Social Security, tied to the also expiring unemployment benefits and the payment method for doctors treating Medicare patients. The concern is that by splitting the issues, the remaining two could fail.

So we're at another standoff juncture.

Although the House is controlled by Republicans, the party will still need some votes from Democrats to pass the bill because some in the GOP oppose the payroll tax cut in general, saying it really does little to boost the economy. Other Republicans are holding firm to demands that all tax relief be offset by spending cuts.

Now about those spending cuts. The Republican leadership still wants the conference committee to look for ways to cover the remaining $50 billion needed to pay for extension of federal unemployment benefits and the so-called Medicare doc fix.

Will the Democrats, who have been major champions of the payroll tax cut, agree to the no-pay extension? If push comes to shove, probably. They saw what happened to their Republican counterparts at the end of last year.

But don't go spending that little bit of extra payroll tax money until the full 2012 extension is signed into law.

Get the latest tax news and filing tips by subscribing to Bankrate's free tax newsletters. Sign up to get a Daily Tax Tip or if you prefer a more consolidated collection, subscribe to the Weekly Tax Tip newsletter. Or get both in your email box.

You also can follow me on Twitter @taxtweet.

Bankrate wants to hear from you and encourages comments. We ask that you stay on topic, respect other people's opinions, and avoid profanity, offensive statements, and illegal content. Please keep in mind that we reserve the right to (but are not obligated to) edit or delete your comments. Please avoid posting private or confidential information, and also keep in mind that anything you post may be disclosed, published, transmitted or reused.

By submitting a post, you agree to be bound by Bankrate's terms of use. Please refer to Bankrate's privacy policy for more information regarding Bankrate's privacy practices.