Trump vows to permanently end payroll tax in 2021 if he's reelected

Henrietta Brewer
August 14, 2020

"We'll be terminating the payroll tax after I hopefully get elected", he said at the White House on Wednesday, following two similar comments during the weekend about making payroll tax cuts permanent.

But aides to the president on Thursday sought to walk back Trump's comments. Employees can also opt out of having the payroll taxes deferred so they don't get hit with a big tax bill next year.

In a Wednesday letter to Mr. Mnuchin, the U.S. Chamber of Commerce, the largest business lobbying group, said it had serious concerns about implementation and raised questions about how to handle seasonal workers, bonuses, fluctuating salaries and the mechanisms for repayment.

A deferral leaves workers still on the hook for the money later on. "In other words, I'll extend it beyond the end of the year and terminate the tax", he said of the payroll tax on August 8.

"There remains widespread uncertainty on how businesses will implement and apply the executive order, and as American employers, workers and families work to navigate the COVID-19 crisis they need clarity not more confusion", Bradley said in a statement. However, an actual tax cut would require an act of Congress, so the executive order only calls for deferring the collection of the employee's share of payroll taxes from September 1 until the end of the year. All payroll taxes, including those for Medicare, were $1.2 trillion in 2019. Over a 10-year period, Trump's idea could slice $13 trillion from USA budget that is already laden with rising debt loads. "Republican tax cuts have never delivered promised growth". "I'm going to make them all permanent". "The numbers just don't add up". The directive came after Trump' had asked Congress to do a payroll tax holiday, which lawmakers rebuffed.

Deferral of the payroll tax, if it's not forgiven at the end of the year, amounts to a four-month, interest free loan for workers who are still collecting a paycheck and could leave employers on the line to claw back money retroactively. Corporations want advice from the IRS on just who is suitable to have their taxes suspended and how to maintain monitor so those people taxes can sooner or later be repaid. "It won't", said Zandi.

Even Trump's short-term plan has deficit implications. Under the CARES Act, employers are allowed to defer payment of the employer share of Social Security tax on wages (6.2% on covered wages) accrued from the effective date of the CARES Act through December 31, 2020. "The American public deserves to hear your plan on how you would replace that funding, and how people can count on receiving their hard-earned Social Security benefits".

Social Security and Medicare already face a dire outlook with retirement funds projected to run out by 2035, according to the Social Security Administration.

Legal challenges to President Trump's executive actions are expected, and such challenges could delay any disbursement of funds to those who are deemed to be the most in need because of the pandemic's effect on the economy, it was noted.

"When Donald Trump continually says that he wants to take action to defund Social Security.we should take him literally and seriously", said Biden spokesman TJ Ducklo. When Social Security's reserves are exhausted in 2035, the program will only be able to pay 79% of benefits at that time, according to government estimates.

"Social Safety is by now struggling with enormous pressures in phrases of the funds", MacGuineas reported. "What we should be doing is fixing the imbalance in the trust fund". "Getting rid of the earnings resource that cash the system would make the finances of it significantly, considerably worse".

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