More On Tax Planningfrom The Advisor's Professional Library
- IRAs: In General Individual Retirement Accounts are highly popular tools for contributing funds that grow on a tax deferred basis. Depending on the type of IRA, the accumulation can be tax free.
- Long Term Care Insurance: Premiums While premiums for qualified long-term-care insurance may be deductible as medical expenses there are exceptions to this general rule. Learn how to avoid unnecessary tax liabilities.
As the battle rages on in Washington over whether to extend the payroll tax cut next year, Senate Majority Leader Harry Reid, D-Nev., said at a press conference on Wednesday that “we aren’t going home until we finish this.”
While “Republican leaders have done their best to convince the public that they favor the payroll tax cut,” Reid (left) said, “they have a funny way of showing it. Obviously, they are having a hard time getting their membership to follow.”
Congress, Reid said, “will pass this tax cut for the middle class by the end of the year. We aren’t going to leave town. We can do it the easy way or the hard way.”
Sen. Bob Casey, D-Pa., who joined Reid at the press conference, introduced this week compromise legislation, the Middle Class Tax Cut Act of 2011 (S. 1944), which would extend and expand the payroll tax cut and includes bipartisan measures designed to get Republicans to support the tax cut extension.
Sen. Chuck Schumer, D-N.Y., who was also at the press conference, warned House Speaker John Boehner, R-Ohio, that if House GOP members decided to go home for the holiday break before a payroll tax cut deal is made, they’ll “be embarrassed in front of the American people.”
While there have been some concerns that a payroll tax cut would have a negative effect on Social Security, Casey said the chief actuary of the Social Security Administration reviewed his proposal and affirmed that the bill will protect Social Security.
Casey released the following details of his compromise proposal:
- Reduces The Size of Package By Roughly One-Third. To address Republican concerns that the overall package was too large, the compromise legislation will no longer provide any tax break for employers. This will cut the size of the package by roughly one-third, from $265 billion to $185 billion. The Casey compromise still cuts in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employees and the self-employed on their wages and salaries for 2012. Approximately 160 million workers will benefit from this tax cut, with the average family seeing nearly $1,500 in additional take-home pay.
- To Help Pay for the Bill, Adopts Bipartisan Deficit-Reducing Proposals From the Supercommittee Negotiations. This proposal will increase the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of