Unemployment Insurance (UI) and Payroll Tax Reduction At the last moment, in December, Congress passed legislation continuing unemployment benefits to the long-term unemployed and the reduction in payroll taxes paid by workers. However, this legislation continues UI and the Payroll Tax benefit only until February 29, 2012.
A Conference Committee has been named to work on a bill to extend the two-month provisions throughout 2012. Members of the Committee are:
Max Baucus (MT)
Jack Reed (RI)
Ben Cardin (MD)
Bob Casey (PA)
Van Hollen (MD)
The conference committee will focus on H.R. 3630, the “Middle Class Tax Relief and Job Creation Act” that was the basis for the debate in the House and Senate last year, and will try to come to a compromise bill to extend Unemployment Insurance , Payroll Tax cuts, and other provisions through 2012.
The House version of H.R. 3630 (passed the House in mid-December) contains harsh elements particularly affecting lower wage and older laid-off workers.
- It denies UI benefits to people who lack a high school diploma (or GED) unless they are enrolled in GED classes. This is problematic because:
- Nearly half of UI recipients are over 45 years of age
- Funding for career, technical, and adult education has declined by 23 percent from the 2006 level and programs for the required education have long waiting lists, which have doubled in recent years
- Many states have eliminated or severely cut back their funding for such programs
- Most workers without a high school or equivalency are among the lowest paid
- Payment into UI by employers is levied on the first $7,000 of wages, many employers pay lower wages to compensate for this. Thus, there is a larger burden for those receiving the lowest wages than on workers paid higher wages.
- It allows states to drug-test individuals prior to providing UI benefits
- It slashes by 40 weeks the length of time one might receive UI benefits, even though more than half the unemployed workers have been searching for over a year. The first tier – 20 weeks of benefits – is maintained, but the second tier is cut from 14 weeks to 13 weeks, except in states with unemployment above 6%, and the 3 and 4th tiers are eliminated, except in states with an unemployment rate above 8.5 percent
- It freezes pay (through 2015) and shrinks the workforce of federal employees by 10 percent in the next ten years. This would come by further cuts to discretionary spending – jeopardizing such areas as veteran’s benefits, food safety, border security and federal employee retirement benefits. The cuts to personnel who process applications and services of the social safety net would multiply the negative impact on those who are least able to take care of themselves and their families.
- It reduces the percent of the payroll tax cut – reducing by half the benefit to boosting the economy
The Senate version of the bill stripped the above provisions, and included only a two-month extension of UI benefits and Payroll tax cuts.
Temporary Assistance for Needy Families
The legislation passed in December included an extension of TANF benefits until February 29, at the 2011 appropriations level.
Medicare Reimbursements to Doctors
In the House bill, doctors were protected from a 27% cut in reimbursement rates for treating Medicare patients for two years. The Senate bill extended the reimbursement rates for only two months.
A permanent “fix” is needed for the problem of reduced reimbursement, which was an error in earlier Medicare legislation. However, each year Congress has chosen to do a short-term fix, which denied a sense of security for future planning.
Regularly Renewed Tax Extenders
The legislation passed in December did not include extension of a number of tax policies, which then expired on December 31. One of these is a fix to the Alternative Minimum Tax (AMT), which provides a higher exemption amount for about 30 million tax-payers who fall below the income for which it is intended.
National Housing Trust Fund (NHTF)
A funding source for beginning the NHTF was identified, and received support for possible inclusion in the legislation extending UI and the Payroll Tax reduction. It was dropped in the end, but the Conference Committee has strong supporters of the trust fund planning for its inclusion.