Snap Fact #137

President Obama fought for, and finally succeeded, in getting Congress to vote for extending the payroll tax cut and emergency jobless benefits through the end of 2012! Under the Middle Class Tax Relief and Job Creation Act of 2012, workers will continue to get larger paychecks for the rest of the year based on having to pay a lower social security tax of 4.2 percent, as opposed to the 6.2 percent which was in place prior to 2011. The lower rate will have no effect on workers’ future social security benefits. Over the course of the year, an individual earning $50,000 would keep an extra $1,000 as a result of the extension.

Self-employed individuals also get to benefit from a similar rate reduction in the social security part of the self-employment tax from 12.4 to 10.4 percent.

 Gridlock over the required revenue offset was eased when both political parties in Congress agreed to use transfers from the general funds of the Treasury to the Social Security fund. 

The IRS has gone on record saying that applying the payroll tax holiday for the rest of 2012 should not cause any large problems in its systems. In spite of the long bitter fight that preceded the surprise about face by the Republican leadership, most of the top House and Senate leaders on both sides of the aisle voted in favor of the bill.

The President has been roundly criticized, even by many Democrats, for consistently extending the olive branch across the aisle. Although he has now begun to fight back, he still has left the door open and not completely painted the opposition into a corner. In recent days they finally have somewhat come to their senses and did the right thing for the country - as well as the politically right thing for themselves. Look for more compromise in the future.