All three members of Vermont’s congressional delegation may be ready to allow the so called "payroll tax holiday" to expire at the end of the year. That would boost tax burdens for middle income families.
Several years ago, Congress backed the president’s plan to reduce the payroll tax from 6.2 percent to 4.2 percent as a way to help middle income people during the recession. If the rate goes back up, it will mean a tax increase of roughly $800 for a person making $40,000 a year.
The payroll tax is the primary source of money for the Social Security fund. Senator Bernie Sanders says he’s concerned that not raising the rate could hurt the fiscal stability of Social Security.
"That simply makes the argument for those people who want to privatize Social Security who tell us incorrectly that Social Security is going broke because this money would not be going into it," said Sanders. "So my view is that we should go back to the 6.2 percent and find, as the president appears to be open to, another way to provide tax relief for the middle class."
Congressman Peter Welch says he was never crazy about the payroll tax holiday in the first place.
"I have to be candid with you. I’ve not been a fan of borrowing money to pay into the Social Security fund," said Welch. "If you and I get a retirement benefit out of Social Security that we paid into it, in my view we’ve got to pay into it. So I’ve been not excited about borrowing money to provide the so called tax break. So I think there’s a reasonable chance that that’s going to end."
Senator Patrick Leahy was not available for comment, but in a prepared statement, he didn’t specifically support efforts to extend the payroll tax cut. "The current payroll tax reductions have helped working families cope in a difficult economy and I hope it will be possible to extend that help one way or another."
Betsy Bishop is the president of the Vermont Chamber of Commerce. She says because the payroll tax cut put more money in the pockets of employees, it took some pressure off of employers to offer salary increases. Now she says the opposite will be true.
"Over the last couple of years we’ve seen some very modest wage increases in Vermont. For sort of the annual cost of living increase 2 to 3 to 5 percent would have been good," said Bishop "And adding this to that will really push employers to think about their wage scale again."
Bishop says it’s critical for the president and Congress to reach a compromise on a Fiscal Cliff solution so that the business community can enter 2013 with some certainty about the state of the national economy.