Posted by 20 August 2019
With fears of a recession rising, the Trump Administration is downplaying any talk that an economic slowdown is imminent. However, some in the White House are considering a payroll tax cut as a way to help avert any decrease in economic growth.
The Trump Administration considers its previous tax cut an economic success, so another tax cut would, in the view of some officials, also spur the economy. This tax cut would center on a temporary reduction in the payroll tax. This tax funds Social Security. Unlike the income tax, which many lower-wage workers do not pay, all workers are hit by a payroll tax. Temporarily reducing this tax would be a broad-based tax cut.
A similar temporary tax cut was undertaken during the Obama Administration. A payroll tax cut is generally preferred by Democrats, because it targets lower-income workers. Supporters contend that it offers more immediate economic stimulus because these workers will spend the money quickly. Opponents of this type of tax cut point out that the revenue from a payroll tax funds Social Security. Reducing money to that program leads to a shorter time-frame in which it is fiscally solvent.
It is unclear if the Trump Administration will officially push for this type of tax cut or any other measure to stimulate the economy. The president has dismissed notions that there will be a recession, saying such talk is politically motivated.
Do you think that there should be a payroll tax cut to stimulate the economy?