White House Considers New Tax Cut
With the payroll tax cuts set to expire at the end of the year, the Obama administration is eying a another round of economic stimulus via tax cuts, the Washington Post reported on Saturday, citing people familiar with the administration’s thinking.
The Post said the administration wants to offer a cut that could mean hundreds of dollars a year more in workers’ paychecks. One option under consideration is to model the reduction after the temporary “Making Working Pay” tax cuts passed in Obama’s 2009 stimulus package that gave individuals an extra $400 a year and couples up to $800. Making Work Pay was limited to individuals making income of less than $95,000 and couples earning less than $195,000.
The cut is under consideration as a cushion for the economy and would replace the temporary cut in payroll taxes, which was enacted two years ago and is set to expire at the end of this year. Some Democrats have expressed reluctance to extend the payroll tax cut another year because of it has traditionally provided the revenue stream for Social Security. AARP, the powerful senior citizens’ advocacy group, opposes a renewal of the payroll tax cut, which reduced the rate workers’ pay to 4.2 percent from 6.2 percent.
"The administration is looking to replicate the effect of the payroll tax cut without relying on Social Security revenue," the sources told the newspaper.
If proposed, the new tax cut would have to be approved by Congress after the election, when lawmakers and the White House will have to tackle negotiations over the “fiscal cliff” of expiring Bush-era tax cuts and automatic spending increase set to take effect at the beginning of this year. President Obama and Democrats want to extend the Bush tax cuts for those making under $250,000, while Republicans want an across-the-board renewal. Without action to prevent the country from heading over the cliff, economists warn the country could slide into another recession
“There's no specific new proposal such as this one at this time," a White House official told the paper. "The very first thing Congress should do is the House needs to follow the Senate's lead and pass the bill the President proposed to ensure taxes don't go up on 98 percent of Americans at the beginning of next year.”
