Just days prior to the expiration of a payroll tax-cut provision, the U.S. House of Representatives and the Senate agreed to extend the cut into 2012.
Congress also agreed to negotiate for a one-year extension. The provision, which went into effect in January 2011, reduced the tax paid to Social Security by 2%. As a result, employees paid 4.2% instead of 6.2%, while employers paid the full 6.2% rate.
If Congress had not acted, some 160 million workers would have seen a tax increase beginning January 1, 2012. The move ended a week-long standoff after a Senate majority approved a bipartisan deal to extend the tax cut for two months. The House originally voted against the deal, but retreated after House Speaker John Boehner received pressure from the White House and from within the Republican party.
The final agreement also extended federal unemployment benefits and included the so-called “doc fix,” which delays scheduled cuts in Medicare reimbursements for doctors.
More in: Taxes