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American Jobs Act Proposes Payroll Tax Changes
President Obama appeared on national television September 8, 2011 addressing a joint session of Congress to outline a stimulus plan that will create new jobs and stimulate the nation’s stalled economy. This plan is called the American Jobs Act.
The American Jobs Act outlines proposals that will directly affect payroll taxes. The employee social security tax rate reduction of 6.2% to 4.2% on wages up to the social security limit of $106,800 was part of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. The act is set to expire at the end of the year; however, the proposal will expand and extend the tax relief. The president proposes that this rate be further reduced to 3.1%, down an additional 1.1%. Employers will also see their payroll taxes cut in half. The social security rate employers pay on the first $5 million in wages will be reduced to 3.1% from the current rate of 6.2%. A full tax holiday on the 6.2% payroll tax for any payroll growth is also proposed for up to a $50 million increase from the prior year, whether driven by new hires, increased wages or both.
Employers could also receive a tax credit up to $4,000 for hiring an individual who has been unemployed six months or longer.
In addition to these proposed payroll tax cuts, the American Jobs Act also proposes extending unemployment benefits, creating an infrastructure bank which would help finance infrastructure developments such as repair roads and bridges and spending billions to modernize school, vacant properties and avoid layoffs for teachers and first responders.
The president’s proposal will be sent to Congress next week, with the president telling legislators that they need to act quickly and pass the act immediately.
Paycor will continue to monitor this act closely and will update this page when more information becomes available.
Read more on the American Jobs Act in the White House press release.