Payroll Tax Cut Could Put $120 Billion in Consumer Pockets
Amid all the hullabaloo surrounding the agreement to extend Bush-era tax cuts and unemployment benefits, an unexpected star sneaked in to steal some of the limelight: Payroll taxes will drop 2% for every worker in the United States in 2011.
If the deal passes Congress, the payroll tax cut would fatten America’s collective wallet by about $120 billion next year, according to the White House. Put another way: Consumers may have more money to spend on your products and services in the new year.
Under the agreement, businesses would also be allowed to expense 100% of their capital investments immediately for tax purposes next year rather than depreciate them. The Treasury Department estimates that could spur as much as $50 billion in additional capital investment next year.
The White House touts the payroll tax cut, in particular, as a major catalyst for jobs creation and overall economic growth. The deal also extends benefits for the long-term unemployed and keeps the Bush-era tax breaks in place until 2013.
The news could be a call for celebration, but not everyone is cheering just yet. Democrats aren’t happy with the deal, and even politically conservative groups like the National Federation of Independent Businesses have tempered their enthusiasm. Senior vice president Susan Eckerly said in a statement that the NFIB was “encouraged” by the pact, but expressed concern over the extension of unemployment benefits and the exclusion of a 1099 rule repeal.
But while competing interests punch it out in the Washington ring, you can at least consider the potential upside for your bottom line. Your customers will have a bit of a bonus to apply to their budgets. If you have employees, they’ll take home a few more dollars in their paychecks. It’s important to keep the big picture in aerial focus, but this looks pretty good on the ground.
Kevin Casey is a business writer for Intuit and is passionate about solving small business problems.