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Middle Class Tax Cut Blocked Again as Deadline Looms

Press Release

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U.S. Senator Debbie Stabenow today made the following statement after Senate Republicans once again blocked legislation that she is cosponsoring, the Middle Class Tax Cut Act of 2011, which would cut taxes for Michigan families. Unless Congress acts this month, a two-percent payroll tax cut for middle-class families will expire at the end of the year. The Middle Class Tax Cut Act of 2011 would not only extend the current two-percent payroll tax cut but would also boost it to 3.1 percent, increasing the take-home pay for Michigan families. Passing this legislation would mean the average Michigan family would take home approximately $1,400 more next year than they would if Congress does not act (county-by-county data is available here). The Treasury Department estimates 5.2 million Michigan workers will benefit from the tax cut, pumping an additional $5.5 billion dollars into the state's economy.

Last week, Senate Republicans blocked tax cuts for middle-class families. While over half of Republicans simply oppose the middle-class tax cuts outright, others said they wouldn't support the tax cuts because they were paid for with a 3.25% surcharge on income in excess of one million dollars. The compromise legislation voted on today was paid for with a smaller 1.9% surcharge on income over $1 million and does not deplete the Social Security Trust Fund. The bill was also paid for with provisions Republicans have supported in the past such as increasing the fees that Fannie Mae and Freddie Mac charge mortgage lenders to guarantee repayment of new mortgage loans, and another ensuring that millionaires cannot game the system to receive unemployment and food assistance benefits.

"I am deeply disappointed that Senate Republicans continue to block tax cuts for middle-class families in order to protect millionaires from paying their fair share," said Senator Stabenow. "Middle-class families simply cannot afford to get hit with a tax hike starting January 1st. Instead, Congress needs to come together and pass common-sense legislation to put more money into the pockets of Michigan families. Failing to act could have devastating effects on our economy."

The Middle Class Tax Cut Act of 2011 would cut in half (from 6.2% to 3.1%) the Social Security payroll tax paid by employees and the self-employed on wages and salaries. That would mean a Michigan family with a median household income of $45,254 would get a tax cut next year of $1,403.

Leading economists support extending the payroll tax cut to keep the economy moving forward. For example, Mark Zandi of Moody's Analytics has estimated that extending the payroll tax cut could create 750,000 jobs. And according to Barclays analyst Michael Pond, letting the payroll tax cut expire at the end of December could cause a drop in Gross Domestic Product of up to 1.5 percent.

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