Posted by 17 July 2020
With another coronavirus relief bill likely to move through the House and Senate in August, members of Congress are considering what should be in such legislation. President Trump wants it to have a payroll tax cut.
The desire for a payroll tax cut has been a consistent theme with President Trump. When the initial economic effects of the coronavirus began to become apparent in March, he suggested the same thing. Congress has not included it, however.
In a statement this week, a White House spokesman said:
As he has done since the beginning of this pandemic, President Trump wants to provide relief to hardworking Americans who have been impacted by this virus and one way of doing that is with a payroll tax holiday. He’s called on Congress to pass this before and he believes it must be part of any phase four package.
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. Others argue that there are more effective ways to stimulate the economy, such as direct payments to individuals. Some critics are also concerned about the long-term effect of cutting payroll taxes on Medicare and Social Security.
Do you think the new coronavirus relief bill should include a payroll tax cut?