The truth is “the holiday is over”.
Last year President Obama pushed for, and congress approved a “payroll tax holiday”. Payroll taxes were temporarily reduced two percent, pre determined to expire Dec. 31, 2011, and then go back to normal.
The temporary withholding holiday equals about $2 per one hundred dollars earned. For a minimum wage earner working full time, that meant just under $6 a week. Employers are required to match the Social Security and Medicare payments they withhold from the workers’ pay checks.
To begin with payroll taxes are not really taxes. Though involuntary, they are contributions to Social Security and Medicare insurance.
I never did comprehend the reasoning behind that because our lawmakers have been hollering about Social Security going broke for a long time.
The holiday has cost more than $1 billion in revenue and in 2011 Social Security paid out more than it received for the first time ever.
In typical fashion, our boys and girls on Capitol Hill have waited until the eleventh hour to try to correct a problem they created in the first place and are now arguing over whether to allow the “tax holiday” to expire as planned, or extend it; and if it is extended how they will make up that revenue.
The Democrats insist on extending the holiday and adding to the budget deficit. Republicans say budget cuts have to be made somewhere else.
Meantime, President Obama is holding up a plan to build an oil pipeline from Canada to our refineries on the gulf coast that would put about 20,000 people to work and create thousands more spin off jobs, and warned congress to not try to tie his approval of the Keystone XL project to extending the payroll tax cut.
He is also the major player telling people to get ready for their taxes to go up. Anyone who was paying attention knows the plan was for the temporary reduction to go back to normal after a year. He is also threatening to not allow Congress to leave Washington for the Christmas holiday if they do not extend the tax holiday.
I have no idea how this is going to play out. In the past when the congress could not come to an agreement they would pass a continuing resolution and take it up again at a later time and that is likely going to happen here.