Obama is still urging Congress, run by the Republican majority, to extend the year’s tax cuts for middle class Americans through 2012. Though it’s easy to blame party politics, there are deeper issues at work in the delay, including how to make up the lost revenue. At this point, however, no consensus has been reached regarding what to do with the payroll taxes.

Payroll Taxes Have Planned

Both businesses and employees are required to pay 6.2% each in Social Security taxes in order to fund the Social Security program. Without this money, the millions of citizens drawing benefits from the system would soon be left out in the cold without access to the funds that many of them use to survive. The tax cuts currently in place reduced the 6.2% paid by employees to 4.2%, giving the average family an additional $1,000 in take home pay over the year. The plan’s intended purpose is to reduce the financial strain on middle class Americans while prompting them to spend their additional money, helping revitalize the struggling economy.

What’s Holding Them Back With Payroll Taxes?

The Republicans in Congress refuse to vote in favor of the bill for various reasons. Most importantly, they feel it would endanger the Social Security program that so many people rely on for their basic needs. By cutting Social Security taxes, the already struggling system may become insolvent much sooner than the predicted 2036. Others still oppose it because the Democrats have proposed tax increases for those who earn over $1 million annually, though several wealthy citizens, including Warren Buffett, have repeatedly called for higher taxes for the wealthy.

How to Pay

All businesses, both large and small, are required to withhold the taxes used to pay for government programs like Social Security. Whether they use online payroll, an in-house system or old school checks, each company must report their payroll to the government and make the required deductions. These companies provide necessary jobs to America’s workforce, but have no say in what they take out. Lawmakers, however, do. Republicans are calling for actions to take in order to cover the costs of Social Security, refusing to give up that funding in order to keep more money in the pockets of the middle class. They have summarily rejected every attempt at tax increases for the wealthy, however, which leaves the question: How do we pay for it?

The Democrats’ Proposal

On Monday the Senate Democrats proposed a new bill that would extend the payroll tax holiday while making concessions to Republicans in an attempt to reach an agreement. The new bill would reduce the cost of the cuts from $265 billion down to $185 billion while still cutting payroll taxes from 6.2% to 3.1%, giving both sides some benefits. This would allow the average family an additional $1,500 in take home pay, helping keep them going during the current financial crisis. The plan would still add further payroll taxes to those earning over $1 million a year, but it would cut the proposed additional tax from 3.25% to 1.9% and would only affect 0.2% of taxpayers.

One thing remains certain: by December 31st, Congress is going to have to reach a decision. We can only hope they make the right one for the good of the country and the American people.