[US] Experts say Trump’s payroll tax cut for workers is a ‘terrible’ idea

Against the objections of some experts, President Trump is insistent that payroll tax cuts for workers be included in further stimulus legislation passed by Congress, CNBC reports.

Speaking in a Fox News interview on Sunday Donald Trump said, “We’re not doing anything without a payroll tax cut.”

Congress implemented the $2 trillion CARES Act which grants employers a temporary reprieve from payroll taxes, until the end of the year. It also applies to Social Security and certain railroad retirement taxes. Now President is seeking a similar cut for workers. (Link via original reporting)

Payroll taxes are withheld from workers’ wages and used to fund government programs like Social Security and Medicare. At present, employees and employers pay a 6.2 per cent tax for Social Security and 1.45 per cent for Medicare. Self-employed workers are responsible for their own full contributions of 12.4 per cent for Social Security and 2.9 per cent for Medicare. (Link via original reporting)

Social Security taxes are phased out for incomes above $137,700. For individuals earning above $200,000, or married couples who jointly file earning above $250,000 if you’re married and file jointly, an additional 0.9 per cent Medicare surtax is due.

The president has raised the idea of a cut to payroll taxes before, to allow American workers higher take-home pay but financial experts are not widely in favour of the move. A primary reason is that the policy would only benefit those still employed not people who are out of work and hardest hit by the coronavirus pandemic.

Len Burman - professor at Syracuse University and an institute fellow at the Urban Institute - said it is a “terrible idea” continuing, “The main problem with the proposal is that it would go to the people who least need help. It seems like you’re deliberately targeting it to people who are in the best situation…the ones who are still working.”

The economic recession is likely to speed up the exhaustion date for the Social Security trust funds, Professor Burman said. Any plans for payroll tax cuts would have to incorporate ways to replenish those funds, which are currently scheduled to run out in 2035 at which time 79 per cent of promised benefits will be payable. (Link via original reporting)

“Trump’s actions are a war on seniors,” Nancy Altman - president of advocacy organization Social Security Works - said in a statement. “He wants to open up the economy, even though COVID-19 is disproportionately costing seniors their lives.” Adding, “Now he is insisting on threatening Social Security on which most seniors rely for their food, medicine and other basic necessities.”

The White House is yet to comment.

The idea has had a lukewarm reception by legislators in the Democratic-controlled House, so the prospect of an imminent payroll tax cut remains unlikely.

Against the objections of some experts, President Trump is insistent that payroll tax cuts for workers be included in further stimulus legislation passed by Congress, CNBC reports.

Speaking in a Fox News interview on Sunday Donald Trump said, “We’re not doing anything without a payroll tax cut.”

Congress implemented the $2 trillion CARES Act which grants employers a temporary reprieve from payroll taxes, until the end of the year. It also applies to Social Security and certain railroad retirement taxes. Now President is seeking a similar cut for workers. (Link via original reporting)

Payroll taxes are withheld from workers’ wages and used to fund government programs like Social Security and Medicare. At present, employees and employers pay a 6.2 per cent tax for Social Security and 1.45 per cent for Medicare. Self-employed workers are responsible for their own full contributions of 12.4 per cent for Social Security and 2.9 per cent for Medicare. (Link via original reporting)

Social Security taxes are phased out for incomes above $137,700. For individuals earning above $200,000, or married couples who jointly file earning above $250,000 if you’re married and file jointly, an additional 0.9 per cent Medicare surtax is due.

The president has raised the idea of a cut to payroll taxes before, to allow American workers higher take-home pay but financial experts are not widely in favour of the move. A primary reason is that the policy would only benefit those still employed not people who are out of work and hardest hit by the coronavirus pandemic.

Len Burman - professor at Syracuse University and an institute fellow at the Urban Institute - said it is a “terrible idea” continuing, “The main problem with the proposal is that it would go to the people who least need help. It seems like you’re deliberately targeting it to people who are in the best situation…the ones who are still working.”

The economic recession is likely to speed up the exhaustion date for the Social Security trust funds, Professor Burman said. Any plans for payroll tax cuts would have to incorporate ways to replenish those funds, which are currently scheduled to run out in 2035 at which time 79 per cent of promised benefits will be payable. (Link via original reporting)

“Trump’s actions are a war on seniors,” Nancy Altman - president of advocacy organization Social Security Works - said in a statement. “He wants to open up the economy, even though COVID-19 is disproportionately costing seniors their lives.” Adding, “Now he is insisting on threatening Social Security on which most seniors rely for their food, medicine and other basic necessities.”

The White House is yet to comment.

The idea has had a lukewarm reception by legislators in the Democratic-controlled House, so the prospect of an imminent payroll tax cut remains unlikely.