As Expected Congress Extends Payroll Tax Cut

February 23, 2012

Congress overwhelmingly passed the $143 billion measure last Friday. The bill extends a two-percentage-point reduction in the tax that funds Social Security and extends jobless benefits for the long-term unemployed. The measure also averts a big cut in the reimbursements doctors get for treating Medicare patients.

The Middle Class Relief and Job Creation Act of 2012, reduces the self-employment rate from 15.3% to 13.3%. The individual share of Social Security stays at 4.2%.

The bill also requires states to reassess the eligibility of workers for their unemployment insurance - confirming, for instance, that a person receiving long-term benefits is actively searching for a job. That reassessment provides an opportunity to tailor career counseling and other re-employment services to the long-term jobless.

The bill additionally expands "work sharing" programs that can help reduce layoffs at big businesses. Businesses have the option of cutting the hours of five workers by 20 percent each, rather than laying off one worker. The business could then use unemployment insurance money to help supplement the workers' wages to make up for the lost hours.

It also keeps additional weeks of unemployment insurance for the long-term jobless, however, it begins the process of reducing the maximum weeks of benefits to 73 from 99. The bill contains other changes to the unemployment insurance system, by allowing the screening and testing of unemployment insurance recipients for drug abuse, in certain cases.

Overall, the extension is expected to cost the government $94 billion

For more information please contact your Perelson Weiner partner.

Return to Newsletter Archive