Payroll tax decision nears end of the year deadline

U.S. President Barack Obama speaks on payroll tax cuts December 5, 2011 in the Brady Briefing of the White House in Washington, DC.

Jeremy Hobson: Well in Washington, Senate Democrats want another vote this week on extending a payroll tax cut for workers. But Republicans say they can't support the Democratic proposal. And if no deal is reached by the end of the year, the Treasury department says the average family will pay $1,000 a year more in taxes.

Marketplace's Gregory Warner reports.

Gregory Warner: Back in 1935, Franklin Roosevelt introduced the payroll tax so that everyone would chip in to Social Security.

Richard DeKaser: Something that everyone would buy into politically. It wouldn't be class warfare, rich against poor but something that all Americans were equally invested in.

Richard DeKaser is Deputy Chief Economist with the Parthenon Group.

That tax was cut by 2 percent last year. President Obama has proposed extending the tax break to next year as well. The political debate is over how to keep paying for Social Security if that occurs. Democrats want to tax millionaires; Republicans want to increase premiums for Medicare. Richard DeKaser says that cutting payroll taxes is a good way to stimulate the economy.

DeKaser: It's targeted to low and moderate income individuals. These are folks who spend every dime that they can get their hands on -- especially in bad economic times like the present. More income to these individuals more rapidly translates through to direct spending in our economy.

And that's a message even Roosevelt could have gotten behind.

In Philadelphia I'm Gregory Warner for Marketplace.

About the author

Gregory Warner is a senior reporter covering the economics and business of healthcare for the entire Marketplace portfolio.
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"That tax was cut by 2 percent last year."

No, that's not correct. In 2010 the employee portion of the Social Security tax rate was 6.2%. In 2011 it was reduced to 4.2%. That's a two percentage point decrease.

You are presenting the same press info that is released by the White House....you are not doing analysis. The payroll tax cut was not funded last year so that is lost to the SS Trust and there is no probability that Republicans will vote for a tax increase to pay for it this year.....we know that it will be paid for by yet more cuts to middle-class programs or left unpaid again. This is a concerted effort by Third Way Democrats to defund entitlements to the point of needing the grand cuts they want to make. Remember, $2.8 trillion has been taken over decades from the SS Trust in similar fashion.

A Democratic politician would be calling for a living wage to put more money in people's pockets as a way of highlighting the incessant push to poverty all American workers by Republicans and Third Way Democrats. I'm feeling sad about the apparent move to the right by NPR on money and investing issues as a result of the funding threat. You are sounding like the Third Way caucus!

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