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The payroll tax cut was signed by President Barack Obama on Wednesday marking a rare bipartisan agreement in the fight over the heritage of the recession, including debts, taxes, and the jobless.
Highlights of the new law include:
- Total measure of $143 billion
- Extending jobless benefits between 63 and 73 weeks
- Avoiding big cuts in reimbursements to doctors who treat Medicare patients
- Continuing the 2 percentage-point reduction in the tax funding Social Security
- Extended the benefits of long-term unemployed averaging about $300 a week
The government holds that for an employee earning $50,000 a year, the tax holiday means $80 a month extra in take-home pay. For employees who earned more the bonus could amount to $2,200 a year.
Obama senior adviser David Plouffe emailed his gratitude saying “Extending the payroll tax cut was a critical step for middle class families, but we still have a lot more work to do. So et ready.”
The Obama administration focused on the payroll tax cut as crucial to their re-election strategy. However, the cost to the deficit would be another $93 billion according to conservative estimates. Accepting that the deficit was inevitable, House GOP leaders agreed to refrain from forcing spending cuts to offset lost tax revenues.
The government has plans to make up for the deficits by auctioning broadcast frequencies and asking new federal workers to contribute more towards their pensions.
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Initially GOP leaders opposed the extensions; however following a nationwide public outcry with millions of jobless receiving their last paychecks, the opposition relented.
Senator John McCain said “We did not want to repeat the debacle… We’re dumb, but we’re not stupid.”
The extension in effect postpones some vital decisions on taxation and government spending to a time after presidential elections and congressional elections are over and done with. The Bush-era tax cuts were also mostly left untouched due to the need of reaching a compromise. For now, the questions regarding the debt-ceiling and that of meeting a trillion-dollar spending cut requirement remain postponed.
