A debate is brewing in the nation's capitol that could have a huge impact on your wallet. Democrats and Republicans are fighting over extending the payroll tax cut. The result could cost you thousands.
The payroll tax cut is already in place. However, it is up for renewal. If Congress doesn't renew the cut, an estimated 160 million Americans could face the prospect of having $1,000 to $1,500 extra taken from their paychecks each year.
It's a debate on Capitol Hill that could put a dent in your wallet come 2012. Congress is fighting over an extension of the payroll tax cut.
"Time is running out," said Minority Leader Senator Mitch McConnell, (R) Kentucky.
"We've got to do this now," said Senator Bob Casey, (D) Pennsylvania.
As it stands now, most middle-class Americans pay 4.2 percent of their pay to the federal government for Social Security tax. In a proposal authored by Senator Casey, Senate Democrats want that number cut down to 3.1 percent.
"Cutting the pay roll tax is one of, maybe the only, action that Congress can take in the next few weeks or months to do just that. to create jobs. We've got to do this now," said Senator Casey.
That dip in the tax rate could cost the federal government almost $200 billion. That lost revenue would be offset by an increase in the payroll tax to people that make one million dollars or more. Senate Republicans are not happy about that rising cost for the wealthy. They say it would stall a key economic driver, small business.
"This is not a compromise. This was another bill designed to fail," said Senator McConnell.
While Congress fights over extending the payroll tax even further, an important deadline looms. If no action is taken by the end of the year, the tax would reset to the pre-payroll tax cut days. That tax rate would stand at 6.2 percent of someone's pay. Republicans say the Democrats are simply grandstanding.
"Democrats can have another week of fun and games on the Senate floor while tens of millions of Americans go another week wondering whether they'll see a smaller paycheck at the end of the year," Senator McConnell said.
If the payroll tax resets to 6.2 percent, the average American stands to lose about $1,000 $1,500 from their pay each year. The deadline for congress to act is December 31. If nothing is done, the *new* old payroll tax will go into effect January 1.