Payroll Tax Holiday Extended Through 2012
by Barbara Gay
Published On: Feb 21, 2012Updated On: Feb 27, 2012
On Feb. 22, President Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630), a $143 billion measure that would extend the Social Security payroll tax holiday through the end of calendar year 2012 as well as the Medicare "doc fix" for 2 years.
Specifically, the bill:
- Reduces employees' payroll tax rate from 6.2% to 4.2%. The employer share of the payroll tax is unaffected by this legislation; the rate for the employer's share of the payroll tax remains at 6.2%.
- Extends certain Medicare payment policies, including a 2-year “doc fix” to protect Medicare physicians from a 27.4% cut scheduled for March 1. A 2-year “doc fix” extension is the longest stretch of time in nearly a decade.
- Updates certain provider payment methodologies to reduce wasteful spending (saves $21.5 billion).
The Social Security payroll tax holiday originally was enacted for 2011 as a means of stimulating the nation's economy by increasing wage earners' disposable income.
Final Medicare package includes modified bad-debt cut
Unfortunately, the final agreement on the Medicare "doc fix" legislation reduces Medicare reimbursement for uncollectible bad debt, but not as much as in the bill originally passed by the U.S. House of Representatives in the fall of 2011.
Congressional Budget Office scoring
A few hours before Congress approved the measure on Feb. 17, the Congressional Budget Office (CBO) released it's analysis of H.R. 3630.