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Wednesday, November 30, 2011

Report: Payroll Tax Cut extension is likely

by Calculated Risk on 11/30/2011 12:45:00 AM

From the WSJ: GOP Set to Back Payroll-Tax Cut

Republican leaders said Tuesday they would join Democrats in supporting an extension of the 2011 payroll-tax cut ... virtually assuring that American wage-earners will continue to receive the benefit next year.
Workers this year have seen their payroll taxes cut to 4.2% of their salary from 6.2%. Democrats want to cut it further, to 3.1%, but Republicans are unlikely to support that.
Probably the two most significant downside risks to the U.S. economy are contagion from the European financial crisis and more rapid fiscal tightening. The extension of the payroll tax cut will lessen the amount of fiscal tightening in 2012 - although government spending will still be a drag on GDP growth next year.

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