Congress approves 2-month extension of payroll tax holiday

On December 23rd Congress approved, and the President signed, a bill (H.R. 3765) to maintain the 4.2 percent Social Security payroll tax paid by employees — which was reduced from 6.2 percent last year — through the first two months of 2012. The bill also maintains, for two months, expanded unemployment benefits and current payment rates for doctors who see Medicare patients.  Without action by Congress, all three provisions would have expired on December 31, 2011. In January, Congress is expected to begin negotiations on how to extend the provisions through the remainder of 2012.

Congress continues to consider payroll tax holiday, unemployment insurance extension, relief from Medicare provider rate cut

Congress is expected to continue to consider legislation to extend the current Social Security payroll tax cut, renew benefits for long-term unemployed workers, and preserve current Medicare reimbursement rates for physicians.  All three provisions will expire on December 31, 2011. This past weekend, the Senate adopted legislation to temporarily extend these provisions for the first two months of 2012, with the intent of adopting legislation before the end of February to extend the provisions for the remainder of 2012. However, House leaders are pushing for a one-year extension.  As previously reported in Capitol Insider, areas of contention include the scope and funding sources for any extensions.

Congress continues to consider payroll tax holiday, unemployment insurance extension

Congress is expected to continue to consider extending the current payroll tax holiday into 2012, 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.  Last week, two bills to extend the payroll tax holiday into 2012 failed in the Senate (S. 1917; S. 1931).  This week, the House is expected to take up legislation introduced on December 9th by Rep. Dave Camp (R-MI) that would extend the payroll tax holiday and unemployment insurance.  The bill contains a number of additional provisions related to Medicare, Temporary Assistance to Needy Families (TANF), the Affordable Care Act, Medicaid, the Additional Child Tax Credit, and Social Security.

Health care provisions included in tax bill

The House “Middle Class Tax Relief and Job Creation Act of 2011” contains a number of health related provisions. The bill includes a two year relief from the upcoming Medicare provider cuts but pays for it with a series health care spending cuts. It makes several changes to provisions in the Affordable Care Act including a change in the low income subsidy for health insurance and an $8 billion dollar reduction in the Prevention and Public Health Fund. It raises the Medicare Part B and D premiums for high income beneficiaries (individuals earning more than $80,000) beginning in 2017. It also makes changes to the payments to hospitals in low income areas in order to save $4 billion over 10 years.   A number of these proposals are not likely to be supported in the Senate or by President Obama but will likely be passed by the House early this week.

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.

Joint Select Committee on Deficit Reduction to hold second public hearing this week

Committee Co-Chairs, Representative Jeb Hensarling (R-TX) and Senator Patty Murray (D-WA), announced that the next hearing open to the public will occur on Thursday, September 22, 2011 at 10 a.m. EST. The hearing will include an overview on Revenue Options and Reforming the Tax Code. The Arc strongly supports a balanced approach to reducing the deficit, since greater revenues would result in fewer spending cuts for disability-related programs. The hearing will be available to watch on C-SPAN at http://www.c-span.org/ and on the Committee’s new website at http://deficitreduction.senate.gov/public/.

Bill to extend Bush-era tax cuts signed into law; ABLE act not included

On December 17, President Obama signed H.R. 4853, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. Despite objections by some House Members to the estate tax provisions and the extension of the tax breaks to the highest income Americans, it cleared by a comfortable 277-148 vote margin. The compromise tax deal extends for two years the expiring tax cuts for all Americans and several expiring corporate and individual tax breaks. Other major provisions include a one year reauthorization of federal unemployment insurance benefits and a continuation of the emergency unemployment compensation benefits. The law also includes a payroll tax holiday during 2011 when individuals will pay two percentage points less on their Social Security payroll tax.

Senator Robert Casey (D-PA) offered the Achieving a Better Life Experience (ABLE) Act of 2009 (S. 493) as an amendment to the tax bill. However, the effort was not successful for reasons unrelated to the merits of the proposal. As a result, the ABLE Act was not included in the final bill that was signed by President Obama. The ABLE Act would allow parents and individuals with disabilities to save money in special bank accounts (similar to educational savings accounts) without affecting federal benefits. The bill has significant bipartisan support in both the House (H.R. 1205) and Senate and is expected to receive attention early in the 112th Congress.

Employer tax credit guidance released by IRS

The Internal Revenue Service released final guidance for small employers, including nonprofits, to use the health care tax credit. There is a new form 8941 which explains how to calculate the credit which can be claimed for eligible employers who provided health insurance in 2010. Non profit employers will use form 990-T to claim the credit. See http://www.irs.gov/newsroom/article/0,,id=231928,00.html?portlet=7.

Senate expected to vote to extend Bush era tax cuts and unemployment insurance

The Senate is expected to vote today on a compromise tax deal that would extend for two years the expiring tax cuts for all Americans and extend several expiring corporate and individual tax breaks. Other major provisions include a one year reauthorization of federal unemployment insurance benefits and a continuation of the emergency unemployment compensation benefits and a payroll tax holiday during 2011 when individuals will pay two percentage points less on their Social Security payroll tax. While the compromise is expected to pass the Senate, its future in the House is less clear as there are strong objections to the estate tax provisions and the extension of the tax breaks to the highest income Americans. Liberals in both chambers have expressed concerns that the compromise goes beyond helping the middle class and provides too generous of benefits to the wealthy.

Two bills to extend Bush-era tax cuts fail in the Senate

Senate Democrats failed twice on Saturday to pass legislation that would have eliminated existing tax cuts for the wealthiest Americans. Needing sixty votes on each measure, a move to eliminate tax cuts for individuals earning more than $200,000 and couples earning more than $250,000 failed by a vote of 53-36. All Senate Republicans and four Democrats and one Independent voted against the measure. The amendment would also have extended the recently expired unemployment benefits. On another vote of 53-37, a second proposal failed that would have set the tax cut threshold at one million dollars. Again, all Republicans votes against as did four Democrats and one Independent. The tax cuts related to these votes expire on December 31. Senate Republican leaders have made clear their intent to block all bills during the lame duck session until the tax cut and FY 2011 appropriations issues are resolved.