The Public and Congress Are on the Hook for Trump’s Payroll Tax Cut Debacle
President Trump couldn’t make Republican senators do the hard work of negotiating a compromise with Congress that would get aid to people hardest hit by the economic recession. So senators went on vacation last month without passing a COVID-19 relief package, and Trump issued convoluted executive orders that are creating more problems than they solve.
The order suspending the payroll tax is the most egregious. A payroll tax deferral doesn’t do anything at all for those who’ve lost jobs (for them, Trump cut federal unemployment benefits in half, created more paperwork for states that participate, then diverted money from emergency response — like hurricanes — to pay for it). This payroll tax “cut” is an administrative mess. The president cannot unilaterally cut taxes, so workers whose employers do not withhold payroll taxes will have to pay the money back next year.
A significant number of private-sector employers have said they won’t take part in the charade. The few employers who participate will stop withholding Social Security taxes from their employees for the last four months of 2020 but must withhold twice the usual amount during the first four months of 2021.
The one employer that has no choice but to go along with Trump’s scheme is the federal government. Federal employees will see larger-than-usual paychecks for four months and then smaller-than-usual paychecks for four months after that.
Trump says if reelected, employees would never have to pay these taxes back. But that would only blow a hole in the Social Security program’s finances, so working people will still pay for Trump’s shell game one way or the other. And of course, the people who are hurting most — those who’ve lost jobs — get nothing.
In May, House Democrats passed the HEROES Act, which would have extended unemployment benefits and provided a lot of other crucial basics that our communities need. The HEROES Act is a comprehensive approach to policy that meets this moment. A payroll tax cut is the wrong policy. And Trump’s convoluted payroll tax scheme is no policy at all.
