Income Tax Cuts, Unemployment Benefits, and Social Security Relief

A deal appears near with President Barack Obama and congressional leaders. The pending bill will essentially give U.S. taxpayers a pay raise which will in turn pump money into the recovering economy almost immediately. The deal will also boost the creation of hundreds of thousands of jobs over the next two years.

The big surprise in the legislation: a one-year 2% tax cut in Social Security withholdings. That cut alone will result in significant take-home upside for most wage earners.

Other income-tax cuts, that were set to expire at the end of 2010, will now remain for at least another year. Those cuts will continue to encourage small businesses to continue to hire as they have been in recent months.

The president and congressional leaders also agreed to extend benefits for the long-term unemployed for 13 more months. That aid had expired Nov. 30 and up to 2 million unemployed people would have run out of benefits by the end of the year.

One year examples for the extent of the cut in Social Security taxes
For worker earning $40,000 a year the Social Security tax cut will result in an additional $800 in take home pay next year. A employee earning $100,000 will take home $2,000 more.

And on the jobs front, the Center for American Progress predicts that extending the unemployment benefits through next year will generate an additional 520,000 jobs -- further undergirding an labor market that is steadfastly improving.