NEW: Sen. Reed Presses for Payroll Tax Cut Extension
Wednesday, November 30, 2011
In an effort to boost the economy and help Rhode Island families, U.S. Senator Jack Reed is calling on Congress to cut every worker’s payroll taxes in half next year. Extending and expanding the soon-to-expire payroll tax cut would put an additional $1,600 into the take-home pay of the average Rhode Island family in 2012. In the last year, about 600,000 Rhode Islanders have benefitted from the payroll tax cut. The tax cut is currently worth an estimated $1,065 to the average Rhode Island family, but is set to expire on December 31, 2011.
According to a report released today by the U.S. Treasury, extending and expanding the payroll tax cut could pump $700 million into Rhode Island’s economy in 2012.
“Congress needs to do everything it can to jumpstart the economy and help working families. I hope we can get bipartisan support for extending the payroll tax cut to help families keep more of their hard earned money and help businesses grow,” said Reed, who supported the current payroll tax cut for workers that was signed into law by President Obama in 2010.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTThe legislation Reed supports would extend the cut through next year, and expand it to 3.1 percent, saving the average American family about $1,500 on their taxes over the next year. The tax cut would also cut in half employer FICA taxes, from 6.2 percent to 3.1 percent on the first $5 million in wages. An estimated 20,000 firms would benefit from the payroll tax cut. Additionally, to help spur more hiring, businesses that expand their payroll (up to $50 million) will be eligible for a 6.2% tax credit for the last quarter of 2011 and all of 2012.
Mark Zandi of Moody’s Analytics has estimated that extending the payroll tax cut could create 750,000 jobs nationwide.
“The average American wants Congress to focus on jobs and economic growth. Simple steps like extending unemployment benefits and cutting payroll taxes meet that test according to economists and businesses who point to weak consumer demand as one of their chief obstacles to economic growth. I sure hope that we can get the other side of the aisle to recognize that fact so we can get more money in the hands of consumers and encourage businesses to hire,” said Reed.
Under the plan Reed supports, the current 2 percent payroll tax cut would be further trimmed by an additional 1.1 percent. Once levied at a rate of 6.2 percent, it was cut to 4.2 percent in 2011, and is proposed to be cut to 3.1 percent for 2012. Reed has also introduced legislation to extend unemployment benefits and expand work sharing initiatives like Rhode Island’s.
The temporary tax cut would be fully paid for with a permanent 3.25 percent surcharge on the income taxes paid by people making over $1 million per year and does not endanger Social Security.
The U.S. Senate is scheduled to vote on extending payroll tax cuts later this week.
