In New Tax Cut Legislation, Lower Estate Tax Survives, Fear Over Social Security's Future

WASHINGTON – A badly divided congress was finally able to send the President a tax cut bill to sign, but although the compromise is a victory of sorts, many in Washington are concerned over its effects. The final vote in the House was 277-148, after opposition Democrats failed in a final bid to change the estate tax provision. The Senate had passed the package 81-19 on Wednesday.

The estate tax, which was temporarily repealed for this year, had previously taxed estates over $3.5 million at 45 percent, which is what Congressional Democrats sought to reinstate. That bid failed and Republicans were successful in securing a $5 million exemption and 35 percent rate.  

However, it may be a "temporary" cut in the Social Security payroll tax that has the greatest long term impact. The tax rate will go down from 6.2 percent to 4.2 percent on income up to $106,800 and will almost certainly face an argument by Republicans to be made permanent, further threatening the viability of the already beleaguered program. Representative Jerrold Nadler, Democrat of New York, told The New York Times, ”We know that politically once you make that tax cut it will be impossible to restore it.“