Senator Casey Offers Compromise to Prevent Huge Tax Hike From Hitting Working Families On January 1st
Casey Trims Overall Cost of Package By One-Third and Adopts Bipartisan Ideas To Keep Proposal Deficit-Neutral
Monday, December 5, 2011
New Package Expected To Receive Senate Vote Later This Week
WASHINGTON, D.C. - Today, U.S. Senator Bob Casey (D-PA), Chairman of the Joint Economic Committee, offered a compromise to stop a huge tax hike from hitting middle income families on January 1st. The proposal is set to be voted on in the Senate later this week.
Unless Congress acts by the end of the month, a payroll tax break worth $1,000 to average middle income households will expire. Economists of all political stripes have called the continuation of this tax cut critical for America’s economic growth, but last week, Senate Republicans blocked two different attempts to extend the tax break. Twenty-six of 47 Senate Republicans even opposed their own party’s version of the tax cut extension.
Senator Casey’s compromise attempts to bring Republicans aboard on the tax cut extension by trimming the cost of the package by roughly one-third and using bipartisan ideas to pay for it.
“As the clock continues to tick down, it is imperative that we come together now on a middle income tax cut,” said Senator Casey. “The legislation is fully paid for and includes measures that have received bipartisan support in the past. It is time to act to help working families in Pennsylvania and across the country get back on their feet and jump start the economy. We can no longer afford to jeopardize working families in order to protect the wealthiest few.”
DETAILS OF CASEY COMPROMISE:
- Reduces The Size Of Package By Roughly One-Third. To address Republican concerns that the overall package was too large, the compromise legislation will no longer provide any tax break for employers. This will cut the size of the package by roughly one-third, from $265 billion to $185 billion. The Casey compromise still cuts in half (from 6.2% to 3.1%)the Social Security payroll tax paid by employees and the self-employed on their wages and salaries for 2012. Approximately 160 million workers will benefit from this tax cut, with the average family seeing nearly $1,500 in additional take-home pay.
- To Help Pay for the Bill, Adopts Bipartisan Deficit-Reducing Proposals from The Super Committee Negotiations. This proposal will increase the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of new mortgage loans. The amount of the increase shall be determined by the Director of the Enterprises but such amount shall not be less than an average increase of 12.5 basis points for each origination year or book year above the average fee imposed in 2011 for such guarantees. These reforms will raise $38.1 billion.
- Significantly Curtails the Surtax on the Wealthiest Few. Last week, the Senate saw a breakthrough when Senator Susan Collins voted for a version of the millionaires’ surcharge. The Casey compromise further modifies the millionaires’ surtax to appeal to even more Republicans. First, it pares down the surtax on modified adjusted gross income in excess of $1 million from 3.25% to 1.9%. The surtax is also made temporary—it would expire after 10 years—instead of permanent. The surtax—which will impact only 0.2% of taxpayers with an average annual income of nearly $3 million—is effective for taxable years beginning after December 31, 2012.
- Adopts GOP Proposal To Cut Off Millionaires From Receiving Unemployment Benefits and Food Stamps. The compromise bill includes a cost-saving reform proposed by Senate Republican Leader Mitch McConnell last week that would make millionaires ineligible for unemployment compensation and food stamps.
- Still Protects Social Security. The legislation would not affect the Social Security Trust Fund by one penny, because it requires that the Social Security Trust Fund be made whole through transfers from the General Fund.