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The President Proposes 2012 Payroll Tax Cut

9 Responses

1. Frank, on December 1, 2011 at 6:57 PM said:

   Decoding the Payroll-Tax Cut
   [How Well Does it Work?]

   Extending the payroll-tax cut is the latest fight in Washington. But how much would it help the economy?

   http://www.propublica.org/article/decoding-facts-the-payroll-tax-cut-and-how-well-it-works

   Frank

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2. Hope R. Hetico RN MHA, on December 3, 2011 at 1:40 PM said:

   Payroll Tax Proposals Debated

   The White House and Senate Democrats have proposed the Middle Class Tax Act of 2011 with a reduction in payroll taxes for 2012. The Social Security tax of 6.2% would be reduced to 3.1% for the year. This could save families approximately $1,500 in take-home pay.

   Businesses would also benefit with the same reduction on the first $5 million in taxable payroll. This provision may benefit 98% of U.S. businesses.

   The White House proposes paying for this provision through a surtax on adjusted gross incomes in excess of $1 million. Single persons and couples with incomes over that amount would pay a 3.25% surtax on the excess income.

   Senate Minority Leader Mitch McConnell (R-KY) responded on November 29 with a Republican bill. His plan would extend the current reduction from 6.2% to 4.2% for employees during 2012.

   McConnell proposes three different methods to cover the costs of his bill. First, there would be a three year pay freeze on salaries of both Congress and all federal civil servants. Second, as federal workers retired, for every three retirees, only one replacement worker would be hired. This will continue until the federal work force has been reduced by 10%.

   Third, individuals with million dollar plus incomes still qualify for Medicare and unemployment benefits. McConnell proposes requiring those individuals to pay their full premium for Medicare and to no longer be qualified for unemployment benefits.

   Source: Children’s Home Society of Florida Foundation

   Editor’s Note: Senate Majority Leader Harry Reid (D-NV) indicated that he and Sen. McConnell will meet to negotiate over the differences in the bills. Both Reid and McConnell are hopeful that a compromise bill can be passed by mid-December. McConnell stated, “In all likelihood, we will agree to continue the current payroll tax relief for another year.”

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3. Ann Miller RN MHA, on December 10, 2011 at 4:41 PM said:

   Payroll Tax Debate Continues

   The Senate voted this week on payroll tax plans by both the Democratic and Republican members. The Democratic plan introduced by Sen. Robert Casey Jr., (D-PA) was modified. The new plan proposes a reduction in the 2012 Social Security payroll taxes from 6.2% to 3.1%. It does not include a reduction for employers and the surtax on incomes over $1 million is reduced to 1.9%. The plan also proposes increased fees on mortgage lenders who work with Fannie Mae and Freddie Mac. The Democratic proposal accepted the Republican suggestion to limit unemployment benefits for those with incomes over $1 million.

   The Republican plan is the Temporary Tax Holiday and Government Reduction Act. It proposes a reduction in Social Security payroll taxes from 6.2% to 4.2% for employees in 2012. The plan is paid for by a 10% reduction in the federal work force through attrition, by freezing salaries next year for Congress and federal workers and by limiting unemployment benefits for those with $1 million in income.

   On Thursday the Republican leadership of the House published their proposed plan. It includes the 2% reduced payment for employees. The Republicans propose paying for the plan with a freeze on salaries of Congress and federal workers. In addition, parents would need to include a Social Security number to claim the child tax credit.

   The White House continued to press leaders in Congress to pass a bill. President Obama stated, “I expect that it’s going to get done before Congress leaves. Otherwise, Congress may not be leaving, and we can all spend Christmas here together.”

   Editor’s Note: While the debate over payment continues, it now seems likely that a compromise plan with a 2% reduction and some method of offsets through other types of savings will be passed this month.

   Source: Children’s Home Society of Florida Foundation

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4. Helen, on December 12, 2011 at 12:37 PM said:

   Pelosi Leaves Door Open to Income Relating As Payroll-Tax Cut Offset

   House Democratic Leader Nancy Pelosi (CA) recently left the door open to asking wealthy beneficiaries to pay more for Medicare Parts B and D services, a proposal that Republicans are pushing as part of a package to offset the cost of President Obama’s top priority, an extension of the payroll tax cut.

   http://insidehealthpolicy.com/index.php?option=com_user&view=login&return=aHR0cDovL2luc2lkZWhlYWx0aHBvbGljeS5jb20vMjAxMTEyMDgyMzg0NDM5L0hlYWx0aC1EYWlseS1OZXdzL0RhaWx5LU5ld3MvcGVsb3NpLWxlYXZlcy1kb29yLW9wZW4tdG8taW5jb21lLXJlbGF0aW5nLWFzLXBheXJvbGwtdGF4LWN1dC1vZmZzZXQvbWVudS1pZC0yMTIuaHRtbA==%20%20

   This maneuver will help pay for a two-year “doc fix,” according to Inside Health Policy.

   Helen

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5. Ray, on December 17, 2011 at 2:45 AM said:

   Senate negotiators reach deal on payroll tax cut extension … Doc Fix too!

   Senate negotiators just reached a deal on a two-month extension of the payroll tax holiday, unemployment benefits and Medicare payments to doctors.

   http://nbcpolitics.msnbc.msn.com/_news/2011/12/16/9503433-senate-negotiators-reach-deal-on-payroll-tax-cut-extension

   Ray

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6. Ann Miller RN MHA, on December 24, 2011 at 1:42 PM said:

   Baucus Promotes Tax Extenders

   The payroll tax reduction bill signed by President Obama failed to include two important tax provisions. Each year for the past two decades, Congress has passed approximately 40 different “tax extenders” and has also adjusted the alternative minimum tax (AMT) exemption for inflation. Neither of these provisions were included in the payroll tax bill.

   Senate Finance Committee Chairman Max Baucus (D-MT) has supported the tax extenders bill each year. He published a press release and indicated that he will fight “to find a bipartisan path forward for these tax extenders, including the research and development (R&D) tax credit, teachers’ expense deduction and job-creating clean energy tax incentives. It is critical to extend these tax provisions early in the year to maximize their effect and provide certainty for the 2012 tax year.”

   The tax extenders include six charitable provisions. The most popular of these is the IRA charitable rollover. Since 2006, IRA owners have been permitted to transfer up to $100,000 directly from the IRA to qualified charities. In prior years (such as 2010) the extension was passed later in the year and it was difficult for many IRA owners to assist their charities through an IRA rollover. Chairman Baucus is asking members of Congress to act early in the year so that donors may plan their 2012 IRA rollovers well before the end of the year.

   Editor’s Note: Because 2012 is an election year, there is a reasonably good prospect for passage of the tax extenders. The IRA charitable rollover now has been effective for the past six years. While there are great differences in Congress, there could be passage of the IRA charitable rollover and other tax extenders for 2012. Hopefully, Congress will follow the advice of Chairman Baucus and take action before the very end of the year. Even though the tax extenders bills have been retroactive to January 1, it is difficult for many IRA owners to plan if Congress passes the bill very late in the year.Children’s Home Society of Florida Foundation

   Source: Children’s Home Society of Florida Foundation

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7. Ann Miller RN MHA, on January 3, 2012 at 1:44 AM said:

   Payroll Tax Cut “Recapture” Plan

   The Temporary Payroll Tax Cut Continuation Act of 2011 will reduce the contributions of all employees to Social Security by 2%. However, part of the bill creates a new “recapture” tax for upper-income taxpayers.

   Taxpayers pay the 4.2% (January and February) or 6.2% (balance of 2012) employee contribution on income up to $110,100 for 2012. The Social Security contributions are not levied on incomes above that level.

   Under the payroll tax bill, a taxpayer with income over $18,350 for the two months will pay a 2% additional income tax on his or her excess earnings.

   If this provision is extended for the full year, the upper-income person will pay 4.2% payroll tax on income up to $110,100. However, on the income from $110,100 to $220,200, the person would pay an added 2% income tax.

   The 2% savings could amount to $2,202 on the first $110,100 of income. Assuming that the “recapture” provision is applicable for the full year, the added tax of 2% on the amount in excess of $110,100 will eventually amount to $2,202. In effect, individuals with incomes over $220,200 will pay the full 6.2% of employee contribution for Social Security. There will be no deductions or credits against the additional 2% income tax.

   Source: Children’s Home Society of Florida Foundation

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8. Ann Miller RN MHA, on January 28, 2012 at 1:37 PM said:

   Payroll Tax Cut Debate Continues

   The Payroll Tax Cut Conference Committee held its first meeting on January 24. Sen. Max Baucus supported both the extension of the payroll cut and an inclusion of tax extenders such as the IRA Charitable Rollover in the bill. He indicated, “In December, along with the payroll tax cut, Congress passed a two-month extension of unemployment insurance, health extenders and a provision to make sure seniors have access to their doctors. And we have an opportunity to extend other provisions that expired at the end of 2011, commonly known as tax extenders.”

   However, Ways and Means Committee Chair Dave Camp (R-MI) suggested that he did not feel the tax extenders could be included. He noted that the extenders were not included in the original bill, H.R. 3630. As a result, he stated that including the tax extenders in a payroll tax bill would be “outside the scope of the conference.”

   The contentious debate will be over the method of paying for the 10-month extension of the 2% payroll tax cut for employees. The Democratic proposal continues to be a surtax on incomes over $1 million.

   The Republican Conference Committee members offer a multiple strategy solution. This includes a reform of the unemployment program, freezing the pay of members of Congress and federal workers, reductions in Social Security overpayments and reduced tax fraud on various tax credits.

   Source: Children’s Home Society of Florida Foundation

   Editor’s Note: Friends of many charities continue to hope that the IRA Charitable Rollover will be extended for the year 2012. While members of Congress anticipate the tax extenders will be passed, Majority Leader Harry Reid (D-NV) has stated that if the tax extenders (and IRA Charitable Rollover) are not attached to the payroll tax cut bill, it is not likely they will be passed until after the November election.

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9. Ann Miller RN MHA, on February 18, 2012 at 2:31 PM said:

   Payroll Tax Cut Extended

   On February 17th 2012, the House and Senate both passed the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630). The 2% payroll tax cut was extended for the full year and compromises were made by both parties.

   The Republican negotiators on the committee had been seeking offsetting budget cuts for the $100 billion cost. Democratic members had sought to increase income taxes on upper-income taxpayers. Both groups dropped their negotiating positions in the final compromise.

   The bill includes three major provisions that affect payroll taxes, unemployment insurance and Medicare.

   1. Payroll Tax Cuts – There is a 2% reduction from 6.2% to 4.2% in the payroll tax for employees. For most taxpayers, this is a savings of $1,000 for 2012. While the Social Security fund will lose $100 billion in revenue, this amount will be transferred through increasing the debt on the general fund.
   2. Unemployment Insurance – For most states, the unemployment insurance may be extended to a maximum of 63 weeks. However, states with unemployment rates over 9% may be able to extend unemployment benefits for up to 73 weeks.
   3. Medicare – The increased reimbursement rate for physicians known as the “Doc Fix” is enacted. For the past decade, physician reimbursement rates have been increased to reflect inflation.

   The payroll tax compromise involves additional funding to pay for the unemployment benefit extension and the “Doc Fix.” There will be broadband spectrum sales to media companies, increased pension contributions by new federal employees and reductions in payments to some Medicare hospitals and certain specialists’ fees. The Medicare hospital and specialists’ fees changes are designed so they will not affect patient care.

   The net result is a compromise between both Republican and Democratic negotiators. Both parties appear pleased that the issue has been resolved for 2012. President Obama is expected to sign the bill promptly. He has strongly supported the payroll tax reduction for this year.

   Editor’s Note: Members of Congress expect this to be the last major tax bill until the November election. Democratic negotiators proposed including the “tax extenders” in the bill but they were not in the final version. As a result, it is still likely that tax extenders such as the Charitable IRA Rollover will be passed but the expected bill will not clear Congress until the end of November. While tax extenders have been passed with dates retroactive to January 1, donors who hope to use the Charitable IRA Rollover for 2012 may delay taking required minimum distributions (RMDs) until the end of November.

   Source: Children’s Home Society of Florida Foundation

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