Would a payroll tax cut work in the COVID-19 economy?
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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
Can businesses deny you entry if you don’t have a vaccine passport?
As more Americans get vaccinated against COVID-19 and the economy begins reopening, some businesses are requiring proof of vaccination to enter their premises. The concept of a vaccine passport has raised ethical questions about data privacy and potential discrimination against the unvaccinated. However, legal experts say businesses have the right to deny entrance to those who can’t show proof.
Give me a snapshot of the labor market in the U.S.
U.S. job openings in February increased more than expected, according to the Labor Department. Also, the economy added over 900,000 jobs in March. For all of the good jobs news recently, there are still nearly 10 million people who are out of work, and more than 4 million of them have been unemployed for six months or longer. “So we still have a very long way to go until we get a full recovery,” said Elise Gould with the Economic Policy Institute. She said the industries that have the furthest to go are the ones you’d expect: “leisure and hospitality, accommodations, food services, restaurants” and the public sector, especially in education.
What do I need to know about tax season this year?
Glad you asked! We have a whole separate FAQ section on that. Some quick hits: The deadline has been extended from April 15 to May 17 for individuals. Also, millions of people received unemployment benefits in 2020 — up to $10,200 of which will now be tax-free for those with an adjusted gross income of less than $150,000. And, for those who filed before the American Rescue Plan passed, simply put, you do not need to file an amended return at the moment. Find answers to the rest of your questions here.
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