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December 20, 2010
In an effort to stimulate the recovering economy, President Obama signed into law an $858 billion bill that will extend the George W. Bush-era tax cuts for another two years.
Before signing the bill, Obama called it "a substantial victory for middle-class families across the country," The Washington Post reported. He added: "They're the ones hardest hit by the recession we've endured. They're the ones who need relief right now."
According to the Los Angeles Times, the tax-relief package, negotiated by Obama and Republican leaders, was met with heavy resistance from Democrats, who contend that the Bush-era tax cuts benefit the wealthy. The Washington Post reported that congressional Democrats' campaign to stop the bill fell short, however, as the House of Representatives passed the law 277 to 148 on Thursday, with 112 Democrats and 36 Republicans voting against the measure.
"This is real money that is going to make a real difference in peoples' lives," Obama told The Los Angeles Times. Had the bill not passed, the tax cuts would have expired at end of the year. In addition, the bill adds 13 months of unemployment benefits and the cuts the Social Security payroll tax by 2 percent for a year, which will create major incentives for business and consumer spending in 2011. With the reduction of these taxes, workers will be able to keep as much as $2,136, according to The Washington Post.
At the signing ceremony, Obama emphasized the importance of putting more money into Americans' pockets in order to invigorate the economy and give consumers confidence.
"In fact, not only will middle-class Americans avoid a tax increase, but tens of millions of Americans will start the New Year off right by opening their first paycheck to see that it's actually larger than the one they get right now," he said.
CNN Money provided an analysis of the tax cut extensions, explaining how it would affect American workers. Employees normally pay 6.2 percent of their first $106,800 of wages into Social Security; but after the package was approved, they will only pay 4.2 percent in 2011. Thus, for every $1000 earned, $42 would be withheld rather than $62.
Employers, however, typically need a few weeks to program and test their new payroll systems, as they adjust to the new tax guidelines.
"It could be the third paycheck of the year before you see a 'normal' check," said Scott Mezistrano, senior manager of government relations of the American Payroll Association.
Compiled by CityTownInfo.com Staff
Sources:
"Obama signs bill to extend Bush-era tax cuts for two more years," washingtonpost.com, December 17, 2010, Lori Montgomery, Shailagh Murray and William Branigin
"Obama signs tax-cut legislation," latimes.com, December 17, 2010, Lisa Mascaro and Michael Muskal
"Tax cut deal: What to expect in your paycheck," money.cnn.com, December 17, 2010, Jeanne Sahadi
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