Posted by 10 March 2020
The fallout from the coronavirus is already having an effect on the stock market. Analysts think it may have larger ramifications for the global economy. To help give the U.S. economy a boost, President Trump is today talking to members of the Senate about a tax cut.
The details of the tax cut have yet to be worked out, but the president has suggested it should be a payroll tax cut. Payroll taxes are levied on income to pay for Medicare and Social Security. Cutting these taxes would affect every worker, especially those with lower incomes. An income tax cut mainly benefits higher-income workers, since lower incomes are not subject to the tax. Payroll taxes, on the other hand, are levied on the first dollar of income, and are capped for higher-income workers.
Since 2009, there have been other payroll tax cuts that have been aimed at stimulating the economy. Some economists argue that since they affect lower-income workers, they provide money to go back into the economy more quickly. Some Democrats in Congress are pushing back on President Trump’s proposal, however, saying that such a tax cut would not provide relief to those who lost jobs or who are in the gig economy.
President Trump is urging Congress to take action to avoid a recession. It is unclear what the economic effects of the coronavirus will be at this early state. However, if there is widespread restriction on travel and public activity, many businesses will suffer.
Do you think that Congress should cut payroll taxes to prevent a recession related to the coronavirus?