Between Thanksgiving and Christmas, congress will be determining a crucial tax policy decision. According to experts, if congress does not extend the payroll tax holiday and unemployment benefits for 2012, there will be about one million fewer jobs than in 2011. Some believe it may even cause a recession.
The payroll tax is the source to fund Social Security benefits. Workers contribute 12.4% of their annual salary towards Social Security, which means employees and employers both contribute 6.2% respectively. Through a technical amendment spearheaded by Obama tax cuts in response to the worsening economy, the payroll tax rate fell to 4.2% for workers for one year. In addition, last year, the average US household saved more than $900 in taxes due to the payroll tax cut. However, because the super-committee has yet to agree on a budget plan, this tax cut could expire by Christmas, which would effectively hinder U.S. economic growth.
With 1 out of 11 people unemployed, the U.S. needs to devise a plan that promotes job growth and appropriate tax cuts. The following chart shows what would happen for each profession if congress does not extend the payroll tax holiday.