COVID-19

What Trump’s payroll tax cut proposes to do for workers, businesses

Kai Ryssdal and Bennett Purser Mar 10, 2020
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President Donald Trump talks to reporters about the spread of the coronavirus, the state of the economy and the market's reaction to the outbreak. Samuel Corum/Getty Images
COVID-19

What Trump’s payroll tax cut proposes to do for workers, businesses

Kai Ryssdal and Bennett Purser Mar 10, 2020
President Donald Trump talks to reporters about the spread of the coronavirus, the state of the economy and the market's reaction to the outbreak. Samuel Corum/Getty Images
HTML EMBED:
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President Trump says his administration is working on a stimulus plan designed to curb the potential economic downturn caused by the COVID-19 outbreak. Among the proposals is a payroll tax cut.

In the U.S., employers are required to pay a portion of each employee’s salary in taxes. According to the Tax Policy Center, the U.S. collected $1.1 trillion dollars in payroll taxes in 2017, financing social security, the hospital insurance portion of Medicare, and the federal unemployment insurance program.

The idea of a payroll tax cut is to boost the economy by getting “a lot of money in a lot of people’s pockets quickly,” said Tara Sinclair, professor of economics at The George Washington University. But that isn’t the case for many consumers.

“They don’t even necessarily notice that additional money because it’s a relatively small proportion of their paycheck,” Sinclair said.

In 2011, President Barack Obama cut payroll taxes by 2%, which averaged around $1,000 extra per family that year. For the Bush administration’s stimulus plan, checks were sent to taxpayers.

The biggest economic worry today isn’t spending, but public health, said Nicole Kaeding, vice president at the National Taxpayers Union Foundation.

“People aren’t going to restaurants and are cutting back on seeing movies and not going to the bowling alley as often, not because of a financial constraint. It’s a public health one,” Kaeding said.

Due to social distancing and cancelled public events, many businesses will face a decrease in demand. But payroll tax cuts only help those who get a paycheck. Retirees, the unemployed and many gig workers would be left out of this stimulus measure.

COVID-19 Economy FAQs

How many people are flying? Has traveled picked up?

Flying is starting to recover to levels the airline industry hasn’t seen in months. The Transportation Security Administration announced on Oct. 19 that it’s screened more than 1 million passengers on a single day — its highest number since March 17. The TSA also screened more than 6 million passengers last week, its highest weekly volume since the start of the COVID-19 pandemic. While travel is improving, the TSA announcement comes amid warnings that the U.S. is in the third wave of the coronavirus. There are now more than 8 million cases in the country, with more than 219,000 deaths.

How are Americans feeling about their finances?

Nearly half of all Americans would have trouble paying for an unexpected $250 bill and a third of Americans have less income than before the pandemic, according to the latest results of our Marketplace-Edison Poll. Also, 6 in 10 Americans think that race has at least some impact on an individual’s long-term financial situation, but Black respondents are much more likely to think that race has a big impact on a person’s long-term financial situation than white or Hispanic/Latinx respondents.

Find the rest of the poll results here, which cover how Americans have been faring financially about six months into the pandemic, race and equity within the workplace and some of the key issues Trump and Biden supporters are concerned about.

What’s going to happen to retailers, especially with the holiday shopping season approaching?

A report out recently from the accounting consultancy BDO USA said 29 big retailers filed for bankruptcy protection through August. And if bankruptcies continue at that pace, the number could rival the bankruptcies of 2010, after the Great Recession. For retailers, the last three months of this year will be even more critical than usual for their survival as they look for some hope around the holidays.

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