Casey compromise should be adopted
Friday, December 9, 2011
by Editorial
Source: Citizens' Voice
With the economy and the unemployment rate showing modest but measurable improvements in recent weeks, Congress' objective should be to build momentum.
Instead, there is paralysis over a one-year extension of the Social Security tax cut that has played a major role in driving this year's progress.
For 2011, Congress reduced the tax paid by workers by 32 percent, from 6.2 percent to 4.2 percent.
President Barack Obama proposed not only extending the reduction through 2012, but expanding it. He planned to reduce it to 3.1 percent, a 50 percent reduction from the original rate, and reducing the rate paid by employers from 6.2 percent to 4.2 percent.
Legislative Republicans opposed the bill.
Sen. Bob Casey, D-Pa., has proposed a compromise that answers many of the Republicans' objections.
Some Republicans contended that the president's $265 billion proposal was too expensive. Casey's proposal is valued at $185 billion.
Critics also contended that an extension would hurt the long-term health of the Social Security system. Wednesday, however, chief Social Security actuary Stephen J. Goss advised the director of management and budget and the secretary of the treasury that the one-year plan would not adversely affect the Social Security trust fund.
Casey's compromise pays for the broad tax cut with an increase in fees paid to Fannie Mae and Freddie Mac by mortgage lenders who use federal guarantees. It also establishes a 10-year surtax on incomes greater than $1 million, but at 1.9 percent rather than the 3.25 percent originally proposed by Obama.
The Social Security payroll tax is capped at the first $106,800 of income, which will increase in 2012 to the first $110,100. Someone making more than $1 million then, would receive the break on the first $110,100, but pay the surtax.
Failing to enact the extension by Jan. 1 will result in the average family paying $1,000 more in 2012 than in 2011.
Enacting the Casey compromise would give those taxpayers an average of $1,500 to roll back into the economy without jeopardizing the long term health of Social Security. Congress should adopt the compromise.