The U.S. House this week will vote on H.R. 4013, a bill which will continue payroll tax relief for the remainder of 2012.
In all of 2011 and through February of 2012, the Social Security payroll tax rate nominally paid by employees has been reduced by two percentage points, from 6.2% to 4.2%. For someone earning $50,000 annually, this has reduced their FICA tax by $1000 over the year.
Americans for Tax Reform is supportive of this extension of payroll tax relief:
Now is not the time for workers to see their take-home pay decline because their taxes went up. If Congress does nothing, workers will see their FICA tax rise in the first pay period of March. People will see this tax increase immediately, and want to know who raised their taxes.
Senate Democrats and the White House have rejected spending cut offsets to payroll tax relief. The House GOP has tried to attach spending cut offsets to extended payroll tax relief. In the face of absolute obstinacy by Democrats, the House GOP is left little choice but to pass stand-alone legislation to prevent FICA taxes from going up in the middle of the year.
While a spending cut offset is ideal, it is not necessary. It doesn't "cost" taxpayers anything to let taxpayers keep their own money. It's not fair to subject tax relief to the same need for spending cut offsets that conservatives rightly demand of new spending programs. The latter is a new burden faced by taxpayers. The former is easing the burden on taxpayers.
It's the middle of the year, and families have set their budgets. It would be capricious and unfair for Congress to pull the rug out from under them for purely political reasons. Changing tax policy now, in the middle of a year, is the definition of bad tax policy.
- Congress should consider replacing the payroll tax relief next year with Congressman Jeff Landry's (R-La.) "SSPICE Act" (H.R. 3551). This bill would allow workers to choose whether they wanted to keep their payroll tax relief (in exchange for a higher retirement age), or pay taxes normally and expect Social Security benefits normally. That would take the choice out of the hands of politicians in Washington and put it in the hands of workers. But that's a 2013 concern. For now, the FICA tax relief should simply be extended through the end of the year.