GOP-Obama Compromise Would Lower 2011 Employee Portion of FICA Taxes

Have you been hiding under a rock? If you are reading this, I'm guessing not. In that case, you know that (surprise, surprise) the President and Congressional Republicans reached a compromise yesterday.

The well-publicized items were that:

• The so-called Bush tax cuts (enacted through EGTRRA in 2001) will become permanent for incomes less than $200,000 (for singles) and $250,000 (for married)
• For higher earners, those cuts will delay their scheduled sunset until the end of 2012 presumably setting up more Congressional warfare after the 2012 elections
• Renew jobless benefits for the long-term unemployed

Not publicized, but perhaps more important to many were these:

• A 2% of pay reduction in the employee-provided portion of FICA (Social Security) taxes for 2011 only. What this means is that workers will get an effective pay increase for 2011 of 2% on the first $106,800 of pay. This may not seem like much, but more US workers than not pay more in FICA taxes than they do in federal income taxes
• Estates would be taxed at a 35% rate for amounts in excess of $5 million

Beware! This is not law yet. House Democrats will need to support this in order to pass it in December. And, whether an associated bill comes to the Senate floor during the lame-duck session of this Congress or during the next Congress, a meaningful number of Senate Democrats would have to support passage in order to make it law.

We'll continue to cover this here.