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Payroll tax cut fight could lead to federal government shutdown

December 14, 2011

Most of the time when members of Congress don't play well together, I try to ignore them. It happens all the time and I prefer to let the kids figure out how to settle their spats without paying too much attention to all the predictable details. (Getting an idea of why I'm not a mom?)

They generally do, but it sometimes takes longer than any of us like. And too often, they have to go back and clean up their messes that have produced unintended consequences for the rest of us who were on the sidelines.

That was my plan with the payroll tax debate.

As I noted earlier this month, both Democrats and Republicans agree that the current 4.2 percent Social Security payroll tax should stay at least at that reduced level for at least another year.

So I, like most Congress watchers, expected a series of political posturing, including some votes during which grand pronouncements that could be used as campaign sound bites were made, followed by a grudging tax compromise and then the holiday break.

Well, these children are really acting up this time.

The GOP leadership was able to get the Middle Class Tax Relief and Job Creation Act of 2011, its Christmas tree bill that contains the payroll tax cut extension and lots of other stuff, through the House Tuesday evening. The 234-to-193 vote was essentially along party lines.

But the measure is dead on arrival in the Senate. That body's Majority Leader Harry Reid (D-Nev.) flat out called any vote on the House-passed bill futile.

And now the stakes have been raised.

In addition to extending the payroll tax cut, unemployment benefits and a fix to the payment system for Medicare physicians, all of which expire Dec. 31 (and which were in the House bill), Congress also has to pass a budget measure to keep the federal government running.

That federal funding deadline is Friday.

And although lawmakers have reached a bipartisan agreement on a $1 trillion measure to pay for the operations of scores of government agencies through next September, some Senate Democrats say they won't sign off on the spending bill until the payroll tax issue is settled.

The serious game of political chicken is on.

And that means we all need to be paying attention to what kind of trouble the kids on Capitol Hill can get into now.

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TO WRAP UP 2026

It’s over! With October’s extended filing deadline behind us, it is now time to focus on year-end moves to reduce your 2026 tax bill. 

You’ll find ways to do just that on the Tax Tips page (see the More Tax Posts drop-down menu at the top of the blog), as well as the separate tax tip pages for each month, notably October through December. If you’re on the Tax Tips page, you’ll find a monthly list at the end of this column. If you’re on another blog page, you can head straight to the October tips; at the bottom of that tips page you’ll find links to all the other 11 months’ collections of tax advice.

Not to spoil what you’ll find in that tax advice, but it does cover such things as tax deductions for charitable donations, investment moves that could reduce tax due, and ways to max out your tax-favored retirement savings. 

Finally, as the year winds down, things get hectic. There are lots of other things to occupy our time, like the much more fun upcoming holidays. But don’t lose sight of taxes, since timing is key. To be of use, most tax moves must be made by the end of the tax year. That’s Thursday, Dec. 31, which also is the last business day of the year. 

So that you don’t miss that final tax year deadline, also keep an eye on the countdown clock below. It will keep you on top of just how much time is left to make important, tax-saving moves. (Note: I’m in the Central Time Zone, so adjust accordingly for where you live.)

Comments
  • packaging machine

    The political structure will lead us to nowhere, for the simple fact that its all big illusion.

  • Year-end tax tip: pay more self-employment tax?

    Should self-employed taxpayers try to move income up from 2012 to 2011 to pay taxes sooner? That’s an intriguing and…

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