Tags: Payroll | Tax | Cut | Extension

JPMorgan: Extending Payroll Tax Cut Will Fuel Growth

Tuesday, 20 Dec 2011 08:02 AM

Extending the payroll tax cut, which is looking increasingly likely but not out a reality yet, will add one percentage point to U.S. economic growth in the first half of 2012, JPMorgan economists write.

Congress is currently debating the payroll tax cut, due to expire in days.

"If Congress extends these income supports, as looks increasingly likely, the (first half of 2012) forecast will be raised to something closer to the recent trend of 2.5 percent growth," JPMorgan economists write a research note, according to CNBC.
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Without the extension, JPMorgan had predicted economic growth of 1.5 percent.

Unless Congress works out a compromise, about 160 million Americans will see their take-home checks cut by 2 percentage points beginning Jan. 1, when this year's 4.2 percent payroll tax reverts to 6.2 percent.

The Senate recently approved a payroll tax cut extension and jobless benefits for two months, although House Speaker John Boehner, an Ohio Republican, said he wants to see it for a year.

"It's time to stop the nonsense," Boehner says, according to CNN. "Americans are tired of Washington's short-term fixes and gimmicks."

Economists warn that if lawmakers fail to extend the payroll tax break, the chances for a return to recession rise.

zandigettyv200.jpg
Mark Zandi
(Getty Images photo)


"I do think recession odds will rise quite significantly early next year if it is not extended," says Mark Zandi, chief economist at Moody's Analytics, according to Reuters.

The pain would come quick, most likely in the first half of 2012, when the economy remains exposed to any shocks that would stem from crisis-ridden Europe as well as continued problems in the housing sector, Zandi adds.

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Extending the payroll tax cut, which is looking increasingly likely but not out a reality yet, will add one percentage point to U.S. economic growth in the first half of 2012, JPMorgan economists write. Congress is currently debating the payroll tax cut, due to expire in...
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2011-02-20
Tuesday, 20 Dec 2011 08:02 AM
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