White House Proposes Payroll-Tax Holiday

See the link below from the Wall Street Journal:

http://online.wsj.com/article/SB10001424052748704156304576003441518282986.html?mod=WSJ_hp_LEADNewsCollection

“Aides to President Barack Obama are proposing a one-year reduction in the payroll tax as part of negotiations with Congress on a broader package to stave off income-tax increases due to take effect next year.
Under the White House plan, the Social Security tax paid by workers would drop temporarily by 2 percentage points, to 4.2% from 6.2%, a person familiar with the proposal said. For a worker earning $40,000, the tax savings would be $800.
The proposal has not won the approval of congressional Democrats or Republicans. Its emergence in the broader tax negotiations is a sign that the White House is trying to break the logjam on those talks before the end of the year, when tax cuts signed into law by former President George W. Bush are due to expire.
White House officials proposed the cut as a way to stimulate the economy, said the person familiar with the talks. The proposal would take the place of an earlier White House push to extend Mr. Obama’s signature Making Work Pay tax cut, which reduced income taxes for middle-income individuals by $400 a year.”

We at Brotelli Investments see this as a step in the right direction to a sustained economic recovery.  We’ll have to see what the final concessions are and whether this even has a chance of passing, but it has the potential to be a BIG net positive for the economy.  The Republicans would have to essentially concede to what is basically a fresh Obama STIMULUS plan.   How likely is that?   If the economy is strong in 2012 due to the impact of further tax cuts it would be a huge centrist victory for the President and make a Republican run for the White House that much more difficult.  Expect a battle here!