Friday, December 23, 2011, President Obama signed a two-month extension of the payroll tax cut memorialized in a bill passed by both the House and the Senate. House Republicans had rejected a similar bill earlier in the week, but passed the legislation after minor tweaks and mounting political pressure.
The payroll tax helps fund Social Security. The bill provides that the payroll tax will remain at 4.2% instead of increasing to the 6.2% rate which was in place before the tax cut was enacted last year. The increased rate would have returned in 2012 had the legislation not been enacted. Over the past few weeks, the White House has implemented a media campaign blasting the bill's detractors, and advertising that eliminating the tax cut would result in reduced take-home pay of approximately $40 per pay period for the typical American worker. Without the continuing tax break, approximately 160 million Americans would have seen an average tax increase of $1,000.
The bill also includes a delay in reduction of payments to doctors who treat Medicare patients, along with a two-month extension of emergency federal unemployment benefits.
The tax cut, or tax "holiday" as referred to be some, is approved for two months, only, through the end of February. The House and Senate will reconvene in January and presumably negotiate a longer term extension.