Congress has extended the employee-side payroll tax cut through the end of 2012. After weeks of uncertainty over whether an agreement could be reached, the House passed the Middle Class Tax Relief and Job Creation Act of 2012 (H.R. 3630) by a vote of 293 to 132 on February 17, 2012. Senate approval quickly followed, also on February 17, by a vote of 60 to 36.

The Temporary Payroll Tax Cut Continuation Act of 2011 (2011 Payroll Continuation Act) had extended the employee-side payroll tax rate reduction of two percentage points through the end of February 2012. The new law extends the employee-side payroll tax holiday through the end of 2012.

On February 16, Treasury Secretary Timothy Geithner told the Senate Budget Committee that he does not anticipate the payroll tax cut would be extended for a third year (into 2013). “This has to be a temporary tax cut. I don’t see any reason to consider supporting its extension.”

The employer’s share of Social Security taxes is not reduced to 4.2 percent but remains at 6.2 percent for all of 2012. That 6.2 percent “half” of Social Security taxes on self-employment income is effectively built into the 10.4 percent rate for 2012.

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