In December, Congress passed a one-year cut in Social Security taxes, reducing the rate for workers from 6.2 percent to 4.2 percent for 2011. Employers still pay the 6.2 percent rate, which is applied to wages up to $106,800.
Appealing to Republicans in Congress who usually favor tax cuts, Obama proposes to extend the tax cut for a year and make it bigger — reducing the Social Security taxes paid by workers to 3.1 percent for 2012. Obama's plan also would cut in half — to 3.1 percent — the Social Security taxes paid by businesses on the first $5 million of their payroll. About 98 percent of firms have payrolls below the $5 million threshold, according to the White House.
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