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Year-end financial details, December 2011

Payroll tax cut extension, expansion dead, for now; Check back around Christmas

OK, folks, just how much blogging blow-by-blow on the payroll tax cut extension/expansion fight do you want?

By now you know that last night the Senate defeated both the Democratic and Republican plans to shave a few percentage points off the amount of Social Security withholding that comes out of workers' paychecks.

Right now, the rate is 4.2 percent, thanks to a 2 percentage point cut of the normal 6.2 percent rate that was part of last year's compromise to extend the Bush-era tax cuts.

First, a quick recap of the current tax cut fight.

Democrats want to increase the tax cut by another 1.1 percentage points. That would mean Social Security tax of only 3.1 percent, or half what the normal rate is. They would pay for this cut with a 3.25 percent tax on income of more than $1 million, aka the millionaires' tax.

Republicans countered with a proposal to keep the 4.2 percent rate for another year and pay for it with cuts to federal jobs and means tests for some federal benefits.

Both suggestions were defeated, in part thanks to the convoluted asinine arcane Senate voting procedures.

But there was one bit of surprise in that more than two dozen Republicans voted against their party's plan, championed by Minority Leader Mitch McConnell (R-Ky.).

So what now?

As expected, everyone on both sides is in full closed door meeting mode today.

The GOP defections notwithstanding, the Senate vote last night was just the latest performance of the Congressional Kabuki theater.

Kanadehon_Chūshingura_by_Toyokuni_Utagawa_III March 1849 production of Chūshingura at Edo Nakamura-za theater courtesy Wikipedia/Wikimedia Commons

Everyone must recite their prescribed/proscribed lines before they likely find a way to compromise. Remember, 2012 is an election year and we, and by we I mean politicians seeking reelection, can't have voters paying more taxes as they head to the voting booth.

House Speaker John Boehner (R-Ohio) has said as much. But right now, his party's counterparts in the Senate, who are in the minority and following the loyal opposition script, are flying high the "Oooohhh, deficit! Oooohhh, taxes! Both sooooo bad!" flag.

I could essentially write two or three blog posts a day on the payroll tax battle as each side shifts positions incrementally. But I think I'll hold off for a while until the expected payroll tax compromise gets a little more fully formed.

In the meantime, you can read more about the payroll tax cut, what happened last night in the Senate and today's follow-up on Capitol Hill from CCH, the Wall Street Journal, the Associated Press (via CBS), the Washington Post, the New York Times and the Tax Foundation's podcast.

And I'll be back, probably very close to Christmas Day, with a post on the eventual resolution.

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