WASHINGTON — President Barack Obama reduce payroll year tax plan would provide big savings for many workers, but makes defenders of nerve social security could jeopardize financial retirement program.
The plan is part of a series of tax cuts and extended unemployment benefits Obama negotiated with leaders of the Republican Senate. They reduce the workers share the social security tax by close to one-third for 2011. Making $ 50,000 salary workers would receive a $ 1,000 tax cut. those who carry out a $100,000 would receive a $2,000 tax reduction.
The Government would borrow $ 112 billion to social security together. Advocates and some legislators worry that by relying on money borrowed to finance social security might force them to compete with other federal programs for a few dollars, leading to reductions.
Social security taxes "should be held sacrosanct,", said REP Earl Pomeroy, D - N.D., Chairman of the House ways and means social security Subcommittee.
"When you start report (social security) tax rates are negotiable, you find yourself in trouble in the long term, I think, in terms of making absolutely certain financing right stream are secure,"said Pomeroy.""
Social security is funded by a 6.2% on the first $106,800 earned by an employee payroll tax. Tax is being matched by employers. All negotiated by Obama would reduce the tax paid by workers to 4.2% for 2011. Employer's rates would remain unchanged.
Obama administration officials say that a reduction in payroll tax is effective for stimulating the economy immediately increasing salary is home to approximately 155 million workers. Non-partisan Congressional Budget Office accepts and many business groups and the Republicans support.
"What was going on compromise was the idea of payroll, which, frankly, a large number of economists and other experts had spoken in the past two years with a lot of support in both political parties, tax day" said Larry Summers, Senior Economic Advisor of the Obama.
The United Auto workers approved the agreement, saying: "working families probably spend the money in their local communities by creating jobs and to stimulate global growth."
The payroll tax reduction is part of a larger package negotiated by legislators Obama and image to expand a table scan of Bush tax cuts expire at the end of the month age group. Some Democratic lawmakers have coldly to the plan, saying it is tilted too much in favour of the rich.
The payroll tax reduction would provide relief to any worker who earn a wage. It would replace making work pay tax credit of Obama provided modest increases in the paychecks of most of the workers for the past two years.
Payroll tax credit would be most generous people making more than $20,000 and making more than $40,000 for married couples. For those who least tax payroll reduction would be less credit to make work pay.
Make work pay, which expires at the end of the year, gives workers a 6.2 per cent of their salary, tax credit, but it is capped at $400 for individuals and $ 800 for couples. The credit is gradually to more than $75,000 people and couples making more than $150,000.
A worker would have to make $20,000 in wages for payroll tax cut equal to $400 Making Work Pay credit tax; couples would be $ 40,000.
At the end of the wage scale, rich workers making $106,800 - maximum wages subject to social security - tax amount would be reduced by $2,136 contributions. Spouse of the worker, who may also obtain a reduction of up to $2,136, payroll tax if he or she is at least $106,800.
The proposal requires that the Department of the Treasury rebuild social security with other government funds, which will have to be borrowed.
"The payroll tax reduction has absolutely no effect on the solvency of social security," said White House Economic Advisor Jason Furman.
Social security has accumulated a Fund Trust 2.5 trillion dollars since the 1980s. But the Government has borrowed that money to pay for other programs. Treasury Department issued special obligations for social security, ensuring that money will be repaid with interest.
As aging baby boomers begin to retire and the system of strain, advocates worry that benefits future cuts. This year, for the first time since the 1980s, social security will provide more benefits it collects in dues. Without change, the social security trust fund runs money by 2037, according to the trustees who oversee the program.
To save money, the leaders of a commission bipartisan deficit has recently proposed a progressive increase of the full retirement, 67-69 age, drawing of opposition from groups representing the elderly.
"This tax cut 2 percent pay is the beginning of the end of social security as we know it," said the National Committee to preserve social security and Medicare, which is headed by the former Rep Barbara b. Kennelly, D-Conn. "worker contributions funded program of 75 years and that the link between contributions and benefits critical is what social security is a self-funded program."
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Online:
Social Security Administration: http://www.ssa.gov/
National Committee to preserve social security and Medicare: http://www.ncpssm.org/
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