$400 Million in New Taxes May Come to RI
Friday, December 02, 2011
The U.S. Senate Thursday failed to extend a social security payroll tax cut which expires at the end of the month, a move that could force Rhode Islanders to pay $400 million in additional taxes beginning next year.
The tax cut extensions were defeated in two separate votes; one asked the Senate to both extend the cuts and make them more generous and the other simply asked them to extend the existing two percentage point payroll tax cut.
Senator Jack Reed hoped Congress would cut every worker’s payroll taxes in half next year, extending and expanding the payroll tax cut to put an additional $1,600 into the take-home pay of the average Rhode Island family in 2012.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTBut Republicans defeated each measure, raising questions about whether a deal will be made to save the tax cuts before the end of the year.
Reed: Jumpstart the Economy
According to information provided by the U.S. Treasury, 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. Reed has argued that extending and expanding the payroll tax cut would 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.
The legislation Reed hoped would pass would have extended the cuts through next year while expanding them 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.
“The average American wants Congress to focus on jobs and economic growth,” Reed said. “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.”
Cicilline: Support the Middle Class
Republicans and several Democrats managed to kill the attempt to extend and expand the tax cuts, falling nine votes short of the 60 need to approve the measure.
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.
Congressman David Cicillline, who also supports extending and expanding the payroll cuts, said allowing the payroll tax cut to expire at the end of this month will result in less money in the pockets of Rhode Island’s middle class families.
“Extending and expanding the payroll tax cut, which is saving American families an average of $1,000 per year, will put more money in the pockets of Americans and boost economic growth,” Cicilline said. “Rather than providing tax subsidies to big oil companies and the wealthiest Americans, we should extend and expand the payroll tax cut for virtually all working Americans.”
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