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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

What’s the outlook for vaccine supply?

Chief executives of America’s COVID-19 vaccine makers promised in congressional testimony to deliver the doses promised to the U.S. government by summer. The projections of confidence come after months of supply chain challenges and companies falling short of year-end projections for 2020. What changed? In part, drugmakers that normally compete are now actually helping one another. This has helped solve several supply chain issues, but not all of them.

How has the pandemic changed scientific research?

Over the past year, while some scientists turned their attention to COVID-19 and creating vaccines to fight it, most others had to pause their research — and re-imagine how to do it. Social distancing, limited lab capacity — “It’s less fun, I have to say. Like, for me the big part of the science is discussing the science with other people, getting excited about projects,” said Isabella Rauch, an immunologist at Oregon Health & Science University in Portland. Funding is also a big question for many.

What happened to all of the hazard pay essential workers were getting at the beginning of the pandemic?

Almost a year ago, when the pandemic began, essential workers were hailed as heroes. Back then, many companies gave hazard pay, an extra $2 or so per hour, for coming in to work. That quietly went away for most of them last summer. Without federal action, it’s mostly been up to local governments to create programs and mandates. They’ve helped compensate front-line workers, but they haven’t been perfect. “The solutions are small. They’re piecemeal,” said Molly Kinder at the Brookings Institution’s Metropolitan Policy Program. “You’re seeing these innovative pop-ups because we have failed overall to do something systematically.”

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