August 18, 2020
Trump asserts that his payroll tax holiday will stimulate the economy, help workers take home more money, and generally be a boon to families suffering economic stress. The payroll tax stems from a 6.2% tax on wages from the employee and an identical payment from the employer. Each will be suspended retroactively from August 1 to December 27. Workers who make less than $100,000 per year will be eligible for the payroll tax cut. Individuals collecting less than $100 a week from the state’s program will not be eligible for this federal subsidy, eliminating supplemental payments to one million workers in need. Employers will also have a cut in taxes but both of these “tax holidays” will be short lived and each will ultimately be paid back unless the President waives the reimbursement in 2021. These taxes support social security which will compensate for the loss by siphoning money from the general fund, the budget that covers government operating costs. The loss of revenues to the Social Security system will be steep. In 2011 and 2012, a recessionary fix included a 2% payroll tax cut to stimulate the economy costing 10 billion dollars per month in revenue loss to the social security system.
The 38 million jobless Americans will have no impact from this executive memo. The real effect of this tax “holiday” is contingent on several vague mandates. For example, an employer can withhold the suspended employee portion for future payback expenses except in states where such actions are prohibited. Another potential negative impact is that repayment may be taken out of future checks as early as the end of the year or in early 2021 and employers can take the whole amount out of one check. Another potential option is that the extra payment will be taken from 2020 income taxes.
Another Trump executive memo to “help” the economy provides a federal unemployment payment of $400 per week, retroactive to August 1, down from the $600 ended on July 31. One challenge of the new order is the requirement that one hundred dollars of it be provided by state funds. Since the states are already covering the regular state benefits many cannot source another $100 a week. Such a mandate would add, for example, $700 million dollars per week to the California state system, a prohibitive burden. The federal funds for this program, Trump proposes, can be taken from FEMA, the federal emergency management agency. This is a terrifying prospect since the summer storm season is already looking severe and storms can cost 22 billion dollars each.
Trump’s executive order regarding evictions does not extend the ban on evictions established in the earlier CARES act but leaves the decision making to the secretary of Health and Human Services and to the CDC director. The potential for assisting renters with payments rests with action by HUD, the federal Housing and Urban Development agency. It estimated that as many as 40 million Americans will be vulnerable to losing their residences.
Finally, Trump extended a suspension of interest payments on student loans until January 1, 2021 but this doesn’t apply to loans private entities like banks.
Trump’s executive acts represent a contracted group of workers with decreased aid in comparison to the earlier CARES act. As in keeping with the federal response to the Covid-19 emergency, this “remedy,” will be a day late and a dollar short.
The bickering between the Republicans and the Democrats has stalled the process and left many workers vulnerable to food shortages, homelessness, and loss of health insurance. The democrats want to extend emergency with a three trillion dollar Heroes plan, more generous than the 2 trillion CARES act passed in March and now expired. The republican program, called HEALS Act would cost one trillion dollars and be far less comprehensive. Chuck Schumer, Senate majority leader, maintains that in addition to help for wages, housing, and tax relief Americans should have programs which include testing, tracing, and treatment of the COVID-19; money for schools to safely reopen and to purchase adequate personal protection equipment; food assistance; budgetary support for local and state governments; money to support safety for the November election; and adequate funding for the Postal Service to support the demands of the election. The likelihood of attaining these measures seems tenuous, at best.
- https://www.cnet.com/personal-finance/trumps-pa yroll-tax-plan-when-the-holiday-starts-how-much-you-get-when-you-pay-it-back/