Lawmakers in Washington reached agreement late Wednesday, February 15, on a legislative package that would extend the Social Security tax break for employees to the end of 2012. Currently, the reduction in the employee share of FICA tax from 6.2% to 4.2% is scheduled to expire at the end of February. Leaders of both political parties were on board with the details of the extension after negotiations into the wee hours of Wednesday, and a final vote is expected as early as Friday, February 17.
Agreement was achieved after both parties decided to abandon the search for revenue to pay the approximate $100 billion cost of the extension. Two other key items were also negotiated, an extension of unemployment benefits for the long-term unemployed, and a temporary patch to Medicare’s payment plan that will shield physicians from a scheduled 27% drop in fees paid by Medicare. The unemployment benefits will, however, be reduced to 63 weeks in states moderately impacted by the recession, and 73 weeks in states with higher jobless rates.
The two breaks other than payroll taxes were paid for by a number of changes, including increasing the contribution of future federal employees to their pension plans (current employees will not be affected), selling off some of the public spectrum reserved for security to telecommunication companies, and taking some money from another feature of the health care law.
The agreement will spare payroll service providers from another part-year reprogramming nightmare, and will also eliminate the necessity for a special tax repayment provision applicable to workers earning more than the $110,100 Social Security tax wage limit.
Unfortunately, the agreement does not deal with other expiring provisions, most importantly the need to again temporarily raise the Alternative Minimum Tax exemption amounts.
Posted by Peter K. Scott