Congress considering extensions of payroll tax holiday, unemployment insurance

Last week, two bills to extend or expand the 2011 payroll tax holiday into 2012 failed in the Senate (S. 1917; S. 1931).  Congressional leaders are now considering ways to advance payroll tax holiday extension legislation by the end of the year, including combining it with an extension of unemployment insurance for long term unemployed workers.  Social Security payroll taxes paid by employees and employers provide dedicated funding for the Social Security Trust Funds.  To stimulate the economy, for 2011 Congress reduced the payroll tax paid by employees by 2 percent, from 6.2 to 4.2 percent of payroll (on up to $106,800 of earnings).  Congress also directed general revenues into the Social Security Trust Funds to cover the 1-year reduction in payroll tax revenues. This payroll tax holiday will expire on December 30, 2011.  The President and Congressional leaders have expressed a desire to extend the payroll tax holiday into 2012.  However, Congress has not reached agreement on the size of a potential payroll tax holiday, or how to pay for it.  Some Members are also expressing concerns about the effects of a continued payroll tax holiday on the Social Security Trust Funds.