In what seems like an annual rite in Washington, DC, the extension of the social security payroll tax cut—a.k.a., the “payroll tax cut”—is once again up for debate.
The cut was first implemented in 2010 under the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. It provided for a 2% reduction in the employee portion of the social security payroll tax, from 6.2% to 4.2%.
The cut was set to expire at the end of 2011, but was extended to the end of February, 2012, and then ultimately through the end of the year.
But this year it’s looking like an another extension of the cut may not happen.
No political consensus to extend the payroll tax cut
With the presidential election and the prospect of a lame duck Congress looming there is little debate on the Payroll Tax Cut extension. Concern is also centering on the still large federal budget deficits which will be partially reduced through the expiration of the payroll tax cut. If anyone has serious intentions of extending the cut they’re laying low right now.
If things stay as they are on January 1st, 2013 the Payroll Tax Cut will expire.