Dissecting 2012’s Final Payroll Tax Cut

The payroll tax agreement just passed by the Congress Friday is being hailed by reporters as a major victory for President Obama going into the 2012 elections.

Sadly, national news coverage has degenerated into a ‘sound bite of the day’ job, and that is what the news media decided it was for the cut.

It is monkey-see, monkey-do journalism. One person says it is a victory for the President and pretty soon they all march in lockstep repeating the same line. Few look for facts.

Wanna know why it was proclaimed a victory? Democrats won this concession: They don’t have to pay for the payroll tax cut!! Yup, it’ll be tacked onto to the $15.4 trillion dollar national debt.

How that could be called a victory for anyone, especially tax paying voters, defies fiscal logic; yet that is exactly what the pundits told us!

Now for the rest of the story…

“Pass this Jobs Bill! Pass it Now!” – President Barack Obama

Remember that? President Obama repeated that line about every 5 minutes in speech after speech for three strait months last summer and fall.

The pundits said Friday the payroll tax cut is the centerpiece of the President’s original job’s plan and that he finally got it. Hurray!

Last October, Senate Majority Leader Harry Reid(D-NV) submitted the President’s original jobs bill exactly as given to him by the administration. It was called the “American Jobs Act of 2011 (S.1660)“. It went nowhere in one of the more partisan votes last year. Three Democrat defectors voted against it.

Then Sen. Robert Casey(D-PA) submitted the “Middle Class Tax Cut Act of 2011 (S.1917)” with just the payroll tax part of the President’s plan paid for with a millionaires tax. That went down in flames to.  A 2nd more extensive Democratic variation of the President’s jobs plan (S.1944) was submitted and voted down TWICE. Just 22 Democrats voting for it.

So much for the President’s plan.

December’s 2-month Payroll Tax Cut Extension

Congress finally passed the ignominious 2-month extension of the payroll tax holiday just two days before Christmas. Then they scurried off on a month long vacation.

A “payroll tax holiday” is a temporary reduction in FICA taxes that fund Social Security and Medicare.

The December law was a Republican submitted plan called the “Temporary Payroll Tax Cut Continuation Act of 2011 (HR3630)” truncated to just 2-months as a concession to Democrats. That one was paid for. Like Friday, it was called a victory for President Obama, too.

The President got practically nothing he asked for in his original jobs plan. What passed was a completely different plan.

President Obama originally asked for a 3.1% reduction in payroll taxes for both employees AND for employers. What remained was a 2% reduction for only employees… the exact payroll tax cut plan proposed by Republicans. Republicans also forced President Obama to finally make a decision on the Keystone XL pipeline. He rejected it.

The President got 1/3rd of the payroll tax cut he asked for and it was extended for two measly months.

A complete report of the winners and losers in December’s tax cut compromise is found here:
Payroll Tax Cut: Victory for Obama?
-Azleader, Inform The Pundits!, 12/27/2011

What President Obama Won

President Obama had little involvement, input or influence with Congress on the final bill passed Friday. As a result there is barely a shadow of the President’s jobs plan left in it.

The President got three things in the final bill:

  • 1/3rd of his requested payroll tax cut
  • An extension of UI benefits
  • The National Wireless Initiative

The wireless initiative has two important parts. One is to auction off wireless broadband spectrum to increase wireless bandwidth for all Americans. The other is for creation of an emergency communications network so all government agencies can communicate directly with each other during times of national crisis. That has been needed since 911.

Big things, including $437 billion in spending, that the President did NOT get:

  • The millionaires tax
  • Major building projects for transportation, K-12 schools and community colleges
  • An infrastructure bank to pay for large building projects
  • Major ARRA-like state stabilization funding for teachers
  • Major ARRA-like state stabilization funding for first responders
  • An expensive set of “Pathways Back to Work” spending programs
  • An increase in the alternative minimum tax
  • Business tax relief in the form of 100% capital outlay depreciation, surety bonds and delays in withholding collections

The Final 2012 Payroll Tax Plan

The version of HR3630 passed into law in December was just 32 pages long. It had a provision for a House-Senate conference committee to work out remaining differences.

Last week’s Conference Report for HR3630 is 266 pages. Heck, the Joint Explanatory Statement for the conference report alone is 76 pages long! They are not casual reading. The House and Senate each set aside 1 hour to debate and understand it last Friday before voting. It was passed by both houses just before Congress adjourned for another week long vacation.

Here are major features included in the final bill:

  • The Republican payroll tax cut plan extended through 2012
  • Extension of UI benefits through 2012
    • 54 weeks for all states
    • 42 more weeks added to states above 6% unemployment
    • 35 more weeks added to states above 7% unemployment
    • 22 more weeks added to states above 9% unemployment
      (That is up to 99 additional weeks on top of the 54 weeks for hard hit states)
  • Medicare and other Health Care Provisions
    • Reverses a 27.4% decrease in doctor Medicare payments into a 1% increase
    • Reduces Obamacare’s preventative health care funding by $5 billion
    • Increases Medicare Part B premium costs for the wealthy
    • Extends certain temporary ARRA health cost reimbursements through 2012
      • Ambulance, outpatient, pathology, etc
      • Extends certain other temporary ARRA health costs
    • Transitional Medical Assistance (old welfare benefit) extended through Dec 2012
    • Reduces “bad debt” medical reimbursements slightly
    • A bunch of fee changes
  • Temporary Assistance for Needy Families (TANF)
  • EPA regulatory relief
  • Flood Insurance Reform
  • Spectrum relocation, auction and establishment of an emergency communication system
  • Set a millionaire qualification standard for UI benefits
  • Other miscellaneous changes


The final payroll tax cut extension for 2012 has little resemblance to President Obama’s original jobs bill.

The President didn’t get the millionaires tax… or the massive $437 billion in ‘son of stimulus’ spending programs… or the infrastructure bank.

Though it does contain a payroll tax cut, it is only 1/3rd the size of the President’s original proposal. The UI benefits and wireless spectrum auction parts, now vastly rewritten, were revived by Republicans, not Democrats.

But the media decided it was a presidential victory because Democrats won the right to avoid paying for a funding cut to Social Security and Medicare.

That is no presidential victory. Given the size of our national debt, when government doesn’t pay for things nobody wins.

As Paul Harvey used to say… now you know… the rest of the story!


About azleader

Learning to see life more clearly... one image at a time!

Posted on Feb 19, 2012, in 2012 Elections, Democrats, economics, infrastructure bank, Job Creation, news, payroll tax cut, Politics, Republican, tax cut. Bookmark the permalink. 5 Comments.

  1. Obama and the Democrats will keep coming back for everything they didn’t get this time. They never give up!

  2. That is true… you notice that President Obama’s budget recently submitted had all the stuff in it that he didn’t get in his jobs plan from last summer?

    It goes without saying Obama will drumbeat a millionaires tax until he gets it or his presidency ends.

  3. Utterly ridiculous. The democrats in congress and in the white house are not unlike that crazy family down the street. The one that insists on leasing a brand new car every year, going out for steaks every night, and off to Paris every summer, all while they’re going bankrupt and their house is falling apart.

    • You are right… why is it that some folks are like that, always spending money they don’t have? Its a sorta “live for today because tomorrow might never come” attitude.

      Most of the time, however, someone eventually has to pay the piper.

  4. I know- right?!!?? The government is going to do whatever the government wants to do (and pay off).

    I found a great site though for small businesses to download free payroll templates on this website. http://www.bestpaystubtemplate.com/

    Every little bit helps!

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