COVID-19

Would a payroll tax cut work in the COVID-19 economy?

Kristin Schwab Mar 11, 2020
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President Donald Trump has suggested a payroll tax cut to help with the economic slowdown caused by the spread of COVID-19. Drew Angerer/Getty Images
COVID-19

Would a payroll tax cut work in the COVID-19 economy?

Kristin Schwab Mar 11, 2020
President Donald Trump has suggested a payroll tax cut to help with the economic slowdown caused by the spread of COVID-19. Drew Angerer/Getty Images
HTML EMBED:
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President Donald Trump wants a payroll tax cut. According to several reports, he’s told Republican senators that he wants to severely reduce the payroll tax through November.

This would be a cut in the taxes used to fund programs like Social Security and Medicare. The Obama administration used a similar cut during the Great Recession to try to spur consumer spending.

But don’t compare the coronavirus economy to the Great Recession, said Alan Auerbach, an economics professor at the University of California, Berkeley, because they weren’t caused by the same factors.

The current slowdown is being caused by a disease that’s keeping more and more people at home, away from work and public gatherings. And no one knows when it will stop.

“There’s not much you can do to restore demand for the industries being directly hit,” Auerbach said.

Extra cash probably won’t get people to take cruises, buy plane tickets or go to concerts. They might save it or use it to stock up on supplies.

Plus, the only people who would benefit from a payroll tax cut are people on payrolls.

“People who are at most risk here economically are the people who would benefit the least,” said Howard Gleckman, a senior fellow in Urban-Brookings Tax Policy Center. A payroll tax cut wouldn’t help people who have been laid off or people without paid leave who are sick or quarantined.

COVID-19 Economy FAQs

Are states ready to roll out COVID-19 vaccines?

Claire Hannan, executive director of the nonprofit Association of Immunization Managers, which represents state health officials, said states have been making good progress in their preparations. And we could have several vaccines pretty soon. But states still need more funding, she said. Hannan doesn’t think a lack of additional funding would hold up distribution initially, but it could cause problems down the road. “It’s really worrisome that Congress may not pass funding or that there’s information circulating saying that states don’t need additional funding,” she said.

How is the service industry dealing with the return of coronavirus restrictions?

Without another round of something like the Paycheck Protection Program, which kept a lot of businesses afloat during the pandemic’s early stages, the outlook is bleak for places like restaurants. Some in the San Francisco Bay Area, for example, only got one week of indoor dining back before cases rose and restrictions went back into effect. Restaurant owners are revamping their business models in an effort to survive while waiting to see if they’ll be able to get more aid.

How are hospitals handling the nationwide surge in COVID-19 cases?

As the pandemic surges and more medical professionals themselves are coming down with COVID, nearly 1 in 5 hospitals in the country report having a critical shortage of staff, according to data from the Department of Health and Human Services. One of the knock-on effects of staff shortages is that people who have other medical needs are being asked to wait.

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