Many people have written to ask my opinion of the proposed expansion of the so-called payroll tax holiday. As any working American knows, the Social Security payroll tax, normally 6.2 percent, was lowered to 4.2 percent for all employees in 2011. And now the administration is proposing not only to extend that reduction for another year but also to reduce the withholding even further — to just 3.2 percent.
There are also rumors about reducing the matching tax paid by employers. In 2011, employers continued to pay the full 6.2 percent, but the proposed legislation would lower their 2012 Social Security tax rate to 3.2 percent, matching that paid by employees.