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Extending a middle class tax break would put more than $1,000 in the average American familyâ€™s pockets for the next year and should help to continue to fuel a U.S. economic recovery, a U.S. Congressman says. The proposed legislation also would help small business owners with payroll taxes.
The biggest battle in Congress will be offsetting the cuts by raising taxes on those making more than $1 million per year. The act would tax income in excess of $1 million by an additional 3.25 percent.
â€śCutting taxes for middle class families and small businesses should be an area where both parties can find common ground,â€ť Democratic U.S. Sen. Sherrod Brown told news media Wednesday in a teleconference. â€śEconomists of virtually all persuasions agree the payroll tax cut helps our economic recovery and every $1 cut in employer side tax cuts generates $1.20 in economic activity.â€ť
He said he is willing to put bipartisan politics aside in the interest of 5.7 million Ohio families and 200,000 small businesses.
The Ohio Democrat bristled at the fact he and his fellow Democrats will face opposition from Republicans, despite the fact his favors middle class Americans and small businesses, because it requires taxing incomes in excess of $1 million.
â€śWith families struggling it is especially important to expand this important payroll tax cut,â€ť Brown said, â€śbut some Washington politicians are willing to do anything to protect tax breaks for those making over $1 million in income.
â€śWe want to pay for this tax cut, we do not want to add it to the deficit,â€ť he said. â€śWe think by paying for it with people making over $1 million one, it is fair because they have done well over the past decade and second, it wonâ€™t affect the economy in a negative way because it is giving money to those people who will spend it.â€ť
House Speaker U.S. Rep. John Boehner, R-West Chester, favors continuing and even expanding the middle class tax cut, but he said he believes they should be paid for through cuts in federal spending.
Boehner told The Associated Press there is no debate about the fact the payroll tax needs to be paid for â€” â€śThe presidentâ€™s called for them to be paid for. Democrats here have called for them to be paid for. So if in fact we can find common ground on these extensions, I think you can take to the bank the fact that they will be paid for.â€ť
Brown co-sponsored the bill because the payroll tax cut would result in $1,430 in the pockets of the average Ohio family next year. The average Auglaize County family would reap $1,513 if the legislation passes Congress, and 1,002 small businesses would benefit from the billâ€™s passage and adoption.
The U.S. senator stressed the existing 2 percent payroll tax cut, which is set to expire at the end of December, needs to be extended at least for one more year to help American families and to help the economic recovery gain a stronger foothold.
â€śAt a time when many families and businesses are still struggling, we must extend and expand this important payroll tax cut,â€ť Brown said of the Middle Class Tax Cut Act of 2011. â€śFamilies will have more money to spend on necessities like gas and food, and their mortgages and rent. Businesses will be able to hire additional workers, boosting the economy. This bill gives tax cuts to people who need them â€” and will use them. Americaâ€™s middle class canâ€™t wait for them any longer.â€ť
Brown cited 2008 Republican presidential candidate U.S. Sen. John McCainâ€™s economic adviser Mark Zandi as saying passing this legislation could create as many as 750,000 jobs and failure to extend the tax credit could push the economy back into a full blown recession.
Brown cited a comment by Barclays analyst Michael Pond, who warned that letting the payroll tax cut expire at the end of this month could cause a drop in the gross domestic product by as much as 1.5 percent.
If the Middle Class Tax Cut Act of 2011 is passed, the act would provide a tax cut to 160 million workers by slashing the Social Security payroll taxes paid by employees and the self-employed on their wages and salary from 6.2 percent to 3.1 percent.
The act also would slash the payroll tax for 98 percent of the U.S. businesses by making the same cut for the first $5 million of payroll. More than 200,000 small businesses in Ohio would stand to benefit.
The act also includes an incentive for business owners to hire new workers by eliminating the Social Security payroll tax paid by employers on the first $12.5 million of an employerâ€™s increased taxable payroll for the 4th quarter of 2011 and $50 million in increased payroll for 2012.