Proposed to Congress on September 12, 2011, the jobs proposal and deficit reduction plan aims to cut the federal deficit by $3.2 trillion over the next 10 years and includes nearly $1.5 trillion in revenue provisions. Some of these provisions could potentially affect your optical business.
On October 11, the Senate failed to pass the jobs proposal and deficit reduction plan. However, the President is now expected to break the bill’s key components into stand-alone components, including payroll tax aspects and employer tax credits for hiring veterans.
Separate from the jobs proposal, the Congressional Deficit Reduction “Supercommittee” continues to look for ways to reduce the deficit, including scaling back current tax breaks and increasing tax revenues.
NOTE: The Jobs Proposal and Deficit Reduction Plan has not yet been signed into law.
This information summarizes the proposed legislation as it currently stands. The following components may change at any time, making it difficult to predict the eventual impact of the legislation.
Highlights of the Jobs Proposal:
- Temporary Payroll Tax Cut for Employers and Employees
- The Social Security tax rate would be reduced for both employers and employees from 6.2% to 3.1% in 2012.
- Temporary Employer Tax Credit for Increased Payroll
Beginning in 4Q2011 and all of 2012 employers would receive a tax credit for increasing their Social Security wages from the prior year. This increase can be attributed to new hires, increased wages or a combination of both. This credit, combined with the Temporary Payroll Tax Cut listed above, would essentially make the employer’s Social Security tax rate 0%.
Beginning October 1, 2011 through December 31, 2011, the 6.2% credit would be available on the excess amount of increased wages in comparison to wages paid from the same period of the prior year (4Q2010).
For January 1, 2012 through December 31, 2012, the 6.2% credit would be available on the excess amount of increased wages in comparison to the wages paid from the same period of the 2011 calendar year minus any amounts attributable to the temporary payroll tax cut.
New employers would receive the tax credit on 80% of their Social Security Wages, if they had zero wages during the corresponding time period.
Veteran Hiring Tax Credits
- Returning Heroes Tax Credit – Employers hiring unemployed veterans who have been looking for work for six months or more will receive a credit of up to $5600.
- Wounded Warriors Tax Credit – Employers hiring unemployed workers with service connected disabilities who have been looking for work for six months or more will receive a credit of up to $9,600.
Source: Paychex
Note: The Vision Council is a very good resource for keeping updated on Government and Regulatory Affairs as it relates to the Optical Industry.
