Tax Cut Stimulus

If Congress does not extend the temporary Social Security payroll tax cut on employees of 2% (from 6.2% to 4.2% on the first $106,800 of income) beyond the end of ’11, that would cut about $120 billion off GDP. And, if long-term unemployment compensation is not extended that’s another $30 billion. Together, that’s a 1% GDP haircut. Given ’11 GDP growth of less than 2% and the turmoil in Europe, households need the money.

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