Snap-O Fact #63

AbstractUnder President Obama’s solid leadership, Congress Approved a 2 Month Payroll Tax Cut Extension. The President immediately signed the bill into Law. The package was approved on Friday, 12/23/2011. This was not only a major victory for the middle class, it was a major political victory for President Barack Obama and a setback for Republicans in the House of Representatives. The final bill will assure that the average employee will avoid paying about $1,000 a year more in Social Security taxes. 

The victory is temporary. The tax rate for employees will remain at the 2011 level of 4.2 percent for only two months. If no further action is taken before Feb. 29, it will rise to 6.2 percent which will mean an $80 a month bite out of an average worker’s paycheck. The payroll tax funds the Social Security retirement pension system. If it had been allowed to rise, the increase would have hit the wallets of 160 million working Americans. 

In addition to holding off the middle class tax increase, unemployment benefits, also set to expire soon, were extended as well. At the same time, cuts in payments to doctors who treat patients in the government-backed Medicare health insurance program for the elderly were postponed, under the bill signed by President Obama. The importance of this action can not be overstated. Not extending the payroll tax cut, analysts warned, could have jeopardized the recovery, and even risked another recession.