James Rufus Koren, Staff Writer
Created: 12/13/2010 05:01:46 PM PST
A tax plan that would put money in the pockets of most American workers moved forward in the U.S. Senate Monday, bringing the prospect of continued tax cuts and additional benefits one step closer to reality.
The plan, a compromise between President Barack Obama and congressional Republicans, would extend the income tax cuts approved in 2001 and 2003, extend federal unemployment benefits and give workers an additional payroll tax break.
For the average San Bernardino County family, the plan could mean a boost of about $1,300 over the next year, or about $112 per month. If it doesn’t pass, meaning income tax breaks aren’t extended and payroll taxes stay the same, it could cost the same family about $200 per month, or a total of $2,400 in 2011.
“You’re looking at about a $300 per month swing,” said Mike Demerjian of Rancho Cucamonga-based Payroll Link. “That’s a lot of money.”
For the past few months, debate over whether to extend the 2001 and 2003 tax cuts has centered mostly on whether the cuts should be extended for the wealthiest Americans – individuals making $200,000 or more or couples making $250,000 or more. While those families would certainly pay more if the tax cuts expire, so would working families of all income levels.
“If (Congress doesn’t) pass the bill, and all the tax cuts expire at the end of the year, everybody would be looking at about another $3,000 increase come tax season,” said Pete Ellena, agent for P&G Accounting in Upland.
The tax and accounting firm Deloitte prepared an estimate of how allowing the 2001 and 2003 tax cuts to expire would impact families across the board, from rich to poor.
The Deloitte estimate shows a married couple, making $50,000 per year, with two children will pay basically nothing in federal income taxes in 2010. If the tax cuts expire, that family would pay $2,900 in 2011.
A similar family making $70,350 will pay about $2,300 in 2010, but would pay about $2,600 more – $4,900 total – in 2011 if the tax cuts expire, according to the Deloitte report.
Demerjian said if the tax cuts expire, federal tax withholding for a San Bernardino County family earning $67,500 – the county’s average household income – would increase by about $200 per month. That is, that family’s paychecks would be a combined $200 smaller each month.
If Congress approves Obama’s plan, it would not only keep the tax cuts in place but also give workers an extra few dollars with each paycheck.
The plan calls for lowering the Social Security payroll tax from 6.2 percent of taxable income to 4.2 percent for one year.
“Basically what that means is anyone with a job will see a 2 percent increase in the amount of money they take home,” Ellena said.
For a taxable income of $30,000, that means a boost of $600 per year, or about $50 per month. For a family with a combined taxable income of $67,500, Demerjian said the boost would be about $1,350, or about $112 extra every month.
The payroll tax break would not be felt by most public employees, who generally do not pay Social Security payroll taxes.
The tax plan made it through a procedural vote in the Senate on Monday, clearing the way for a final vote today or Wednesday. If approved, it would then go to the House of Representatives.
Locally, Rep. Joe Baca, D-San Bernardino, has said he is against the plan because it extends tax breaks for the wealthy, which he said could lead to cuts to important government programs in the future.
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