Payroll tax cut debate resumes

Lawmakers have yet to pass a long-term extension of the payroll tax cut for this year, CNNMoney reports, despite widespread support for the measure.

The short-term extension passed at the end of 2011 expires at the beginning of March, giving legislators one month to agree on how to pay for the provision, which was the sticking point that prevented a full-year version of the tax break from being passed before January. Few lawmakers still oppose the measure itself, which would set the payroll tax rate at 4.2 percent instead of 6.2 percent for the rest of the year, affecting about 160 million workers across the nation.

The same legislation is expected to prevent pay cuts to Medicare physicians and extend emergency federal unemployment benefits. According to the Congressional Budget Office, the lower payroll tax rate will cost $100 billion from March to December.

"Extending the payroll tax cut through the end of the year will increase output and increase employment," CBO budget director Douglas Elmendorf recently told the House Budget Committee.

Some lawmakers have proposed that the savings from decreased spending on military operations abroad may be used to cover the expense at least partially, although not all agree. As the debate continues, day traders could be impacted by other methods of paying for the tax cut, namely rate increases or the elimination of tax breaks. With a month until the deadline, given the difficulty of passing the current two-month extension at the end of last year, some are concerned that the payroll tax cut will distract from broader tax and fiscal policy issues.