The American Jobs Act submitted to Congress this week calls for a temporary payroll tax cut and a temporary credit for increased payroll. The specific tax breaks in the proposal include:
- For 2012, the employee’s portion of Social Security tax would be 3.1%; the employer’s portion would also be 3.1%, up to the first $5 million of wages paid by the employer. The tax on self-employed workers would be reduced to 6.2%.
- From October 1, 2011 through December 31, 2012, the proposed bill would provide a payroll tax credit to offset the employer portion of Social Security tax due to wage increases over the corresponding period in the prior year.
While these proposed changes seek to reduce tax for those who may be affected by the current economic conditions, another proposed bill would increase the Social Security wage base for certain wage earners. Senator Bernie Sanders and Representative Peter DeFazio introduced companion bills this week. Under the proposed legislation, the wealthiest workers would pay the same payroll tax that is assessed on those workers with incomes up to $106,800 annually. Sanders indicated that “The most effective way to strengthen Social Security for the next 75 years is to eliminate the cap on the payroll tax on income above $250,000 annually.