Senate Republicans are hopeful that they can tie a one-month Social Security holiday for all workers and employers to the economic stimulus package that is currently before Congress. The holiday would take the place of previously discussed plans for an additional tax rebate for low-income workers, and would most likely occur in January, 2002.
Democrats have indicated they are open to negotiations on the Social Security tax holiday, as long as Republicans consider adding a $15 billion homeland security package to the bill.
President Bush is urging the two sides to come together and finalize a stimulus package before Christmas.
The tax holiday, first suggested by Sen. Pete Domenici, R-NM, would provide a one-month break from the 6.2% Social Security tax for all workers and employers, with self-employed workers entitled to keep the entire 12.4% tax that they pay. To avoid a shortfall in the Social Security Trust Fund, the tax would be replenished from general tax revenues. It is estimated that the value of this tax benefit would be approximately $43 billion.
Under the proposed legislation, an employee earning $40,000 per year would save $207, as would his employer. A self-employed individual earning the same amount would save $413.