Congress Passes Payroll Tax Cut Extension
February 23, 2012
From SBAM’s national affiliate, NSBA:
On Feb. 17, 2012, both the U.S. House of Representatives and Senate approved a bipartisan deal to extend the payroll tax cut, federal unemployment benefits and prevention of a reimbursement cut for Medicare doctors through the end of the year.
The House voted 293-132 to pass the bill (H.R. 3630), and the Senate followed soon after to approve the bill in a 60-36 vote. The measure is now set to go to the White House for President Obama’s signature, which he indicated will sign later this week.
The deal was actually agreed to mid-week and finalized and endorsed by the conference committee on Thursday, ending months of battle as lawmakers faced expiration of a temporary extension of the three items at the end of the month.
Critical to the success of the victory, was the concession by House Speaker John Boehner (R-Ohio) and other House Republican leaders that they would not insist the $94 billion payroll extension part of the deal be paid for. Under the agreement, the legislation will extend the current 4.2 percent employee payroll tax rate through the end of 2012; Congress late last year extended the reduction from the prior 6.2 percent rate through the end of February.
The package also puts off a 27.4 percent cut in payments to Medicare doctors, costing $17.9 billion over 10 years. It is funded in part by a $5 billion cut to a preventive medicine health fund in the health care law, and a $6.9 billion cut to Medicare hospitals for non-payment on premiums and co-pays.
The legislation includes a three-tiered reduction in overall federal unemployment benefits that relies heavily on the unemployment rates in individual states. The agreement would provide a maximum of between 89 and 99 weeks of coverage from March through May of this year, in June the maximum would go to 79 weeks, and by September, it would fall to 73.
The extensions to the unemployment benefits and the so-called “doc fix” were paid for through spending cuts and the bill did not include any extensions of other popular expired tax breaks, such as the 100 percent bonus depreciation provision from 2011 or an increase in mass transit tax subsidies. It is possible that deliberation on the expired tax extenders could be delayed until after the November elections. Congress—at that time—will be facing the another critical tax issues: the Dec. 31, 2012 expiration of the Bush tax cuts enacted in 2001 and 2003.