This content is not available in your region

US payroll tax break battle heats up

US payroll tax break battle heats up
Text size Aa Aa

A tax concession for 160 million US workers is in doubt because of strong opposition from Republicans in the lower house of Congress.

Despite the fact that over the weekend the upper house, the Senate, overwhelmingly voted to delay until February an increase in that payroll tax — which goes towards pension provisions.

Without congressional action the tax workers pay into the Social Security federal retirement programme will rise to 6.2 percent on Jan. 1, from 4.2 percent.

Republicans in the lower house are now demanding the bill be amended and time is running out to do that.

President Barack Obama and his Democratic allies in Congress say continuing the payroll tax at a lower rate for another year will help spur the fragile US economic recovery.

“It is my expectation, in fact it would be inexcusable for Congress not to further extend this middle-class tax-cut for the rest of the year (2012). It should be a formality, and hopefully it is done with as little drama as possible,” Obama said.

If there is no deal and the tax is raised it will cost the average US worker $1,000 a year.

With all this happening around Christmas, the Democrats will try to cast the Republicans as Scrooge.

Voters will likely see it as another example of Washington being more concerned with politics than economics.

Public confidence in Congress has plunged to record lows this year after a series of bitter fights between Democrats and Republicans over spending and taxes brought the government to the brink of a shutdown three times and cost the United States its prized AAA credit rating from Standard & Poor’s.