Late Thursday night, the Senate defeated a bill proposed by Democrats that would extend and expand this year’s payroll tax holiday into 2012. The payroll tax cuts initiated last year are set to expire at the end of 2011, and if they are not renewed then employees will see a jump in payroll tax deductions from their paychecks. Some analysts predict that these cuts could result a net loss of $1,000 per household.
The proposed payroll tax holiday would cut the rate employees pay in half, to 3.1 percent from 6.2 percent, and it would also cut the rate employers pay on the first $5 million of their payroll to 3.1 percent. The cut would cost the government $265 billion, and it would be paid for over the next 10 years with a 3.25 percent surtax on incomes over than $1 million.
The vote on Thursday was mostly symbolic, designed to put Republican dissent over the tax holiday on record. President Obama admonished Congress for not passing the bill, saying, “It makes absolutely no sense to raise taxes on the middle class at a time when so many are still trying to get back on their feet.” Lawmakers on both sides of the aisle have said that they are willing to negotiate the payroll tax cuts, but some are worried that extending the cuts on a yearly basis will lead to making them permanent, resulting in large revenue losses for government programs like Social Security.
Should the payroll tax cuts be extended? Here’s the Debate Club’s take: