Image via WikipediaOne year ago at this time, I was concerned about whether or not Congress and President Obama would keep the George W. Bush tax rates in place. It was a particular concern for me at the time because I was weighing my health insurance benefit options at the time. My portion of my health insurance was going to be going up 23% over the previous year. Having a tax increase at that time would have been a tremendous hardship for my family at the time.
Thankfully, they were able to agree that during the tough economic climate, it was not a wise idea to let the tax rates expire. In addition to extending the existing tax rates, in an effort to stimulate the economy and to give an additional tax break for middle and lower income folks, Obama asked for and Congress passed a 2% payroll tax holiday. All told, that small tax break ended up being just enough to cover my increased health insurance costs.
Overall, the tax break did little to stimulate the economy. As I said, for me personally, the tax holiday just about covered my additional health care expense. Couple that with higher food and energy prices, and my purchasing power probably dropped a bit. I am sure most people in my income bracket experienced similar results this past year.
Unfortunately, the tax holiday is set to expire at the end of the month. Currently, both parties say that they want to extend the tax holiday, but of course they do not agree on how to do it. Obama, of course, wants to raise taxes on higher income earners, while the Republicans want to cut other spending. I don't know if extending the payroll tax holiday will help the economy or not. I do know that if it isn't extended, that it will hurt my own financial situation and that of others I know, which definitely won't help.