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Payroll Tax Holiday: Temporary from the Beginning


Posted by Rushad Thomas on Friday, January 13th, 2012, 2:39 PM PERMALINK


In December 2010, Congress enacted a 2 percentage point payroll tax reduction, bringing the FICA rate down from 6.2 percent to 4.2 percent as a part of the legislation extending unemployment benefits and preventing tax rates from rising. All throughout the debate Democrats billed the reduction as a temporary move, slated to expire on December 31, 2011. Congress is considering whether to extend this rebate. Because it was always a temporary measure, opposition to this extension cannot fairly be called support for a tax increase. There is ample evidence that Democrats always believed the payroll tax rebate to be temporary.

  • The Congressional Budget Office and the Joint Committee on Taxation both scored the tax cut as a temporary payroll tax reduction leading to a loss of $67,239,000 in revenue for 2011 and $44,414,000 in revenue for 2012, yet scored the revenue loss as zero for the years past 2012.
  • The White House’s FY2012 Budget describes it as “…A temporary reduction in the Social Security payroll tax rate for employees and self-employed individuals... [for] wages received after December 31, 2010 and before January 1, 2012.”

In addition, the record bears a number of statements by prominent Democrats indicating their original intention for the tax to be temporary.

“Well, let me say a few things.  One, if I’m not mistaken, the commission had a payroll tax cut in their proposal.  Two, this is not a long-term -- this is not a -- by definition, a long-term plan.  This is an agreement to -- basically tax policy for the next two years.”
Former White House Press Secretary Robert Gibbs, WH Press Briefing, December 14, 2010

“This bill is going to breathe life into the private sector through a payroll tax reduction of 2 percent for 1 year.”
Sen. Bill Nelson (D-Fla.) speech on the Senate Floor, Wednesday, December 10, 2010

“This agreement would also mean a 2 percent employee payroll tax cut for workers next year -- a tax cut that economists across the political spectrum agree is one of the most powerful things we can do to create jobs and boost economic growth.” (emphasis added)
President Obama, December 6, 2010, Statement by the President on Tax Cuts and Unemployment Benefits

“Some top Democrats appear less concerned that any push to extend the tax cut would be successful. Rep. Barney Frank (D-Mass.) said the Democrats' message in favor of allowing the tax holiday to expire would be simple: "That it's necessary to save Social Security." Asked if Democrats will be successful capping the tax holiday at one year, Frank responded with one word: "Yes."
December 26, 2010 The Hill article by Mike Lillis entitled “Republican leaders say there are no plans to extend payroll tax holiday.”

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