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1 1 (August 23, 2019)

handle is hein.crs/govbavi0001 and id is 1 raw text is: Congressional _____ * esearch Service ~~hformrng the Iegista tive debate since 1914 Payroll Tax Cuts as Economic Stimulus: Past Experience and Economic Considerations August 23, 2019 A range of fiscal and monetary policy tools have been used in the past to respond to weak economic conditions and recessions. One of those policy tools, enacted as economic stimulus in December 2010, was a temporary employee payroll tax cut. On August 20, 2019, President Trump expressed interest in proposing a payroll tax cut, although subsequent reports indicate this may not be a policy the Administration intends to actively pursue at this time. 2011-2012 Payroll Tax Cut Payroll taxes are collected to finance certain entitlement programs, including Social Security, parts of Medicare, and Unemployment Compensation (UC). Social Security's old age, survivors, and disability insurance (OASDI) payroll tax is paid by eligible workers and their employers. The tax equals 6.2% of wages, on the taxable earnings base ($132,900 in 2019). This tax is paid by both employers and employees (with self-employed individuals paying both the employer and the employee share, or 12.4%). In December 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (P.L. 111-312) enacted a payroll tax holiday that temporaily reduced the employee and self- employed shares of the OASDI payroll tax by two percentage points (from 6.2% to 4.2% for employees; and from 12.4% to 10.4% for the self-employed). The Social Security trust fund was made whole by a transfer of general revenue. The temporary reduction was scheduled to expire at the end of 2011, but was extended for two months as part of the Temporary Payroll Tax Cut Continuation Act of 2011 (P.L. 112- 78). The temporary payroll tax cut was extended again through the end of 2012 by the Middle Class Tax Relief and Job Creation Act of 2012 (P.L. 112-96). The temporary payroll tax cut in P.L. 111-3 12, effective for 2011, reduced federal tax revenue by $111.7 billion. The two-month extension for early 2012 reduced federal revenue by $20.8 billion, while extending the payroll tax cut through the remainder of 2012 reduced federal revenue by $93.2 billion. Stimulus Effects of a Temporary Reduction in Payroll Taxes Short-term fiscal stimulus measures aim to boost economic activity primarily through increases in the demand for goods and services. The Congressional Budget Office (CBO), in testimony before Congress, Congressional Research Service https://crsreports.congress.gov IN11159 CRS INSIGHT Prepared for Members and Committees of Congress

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