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
What’s the latest on the extra COVID-19 unemployment benefits?
As of now, those $600-a-week payments will stop at the end of July. For many, unemployment payments have been a lifeline, but one that is about to end, if nothing changes. The debate over whether or not to extend these benefits continues among lawmakers.
With a spike in the number of COVID-19 cases, are restaurants and bars shutting back down?
The latest jobs report shows that 4.8 million Americans went back to work in June. More than 30% of those job gains were from bars and restaurants. But those industries are in trouble again. For example, because of the steep rise in COVID-19 cases in Texas, Gov. Greg Abbott, a Republican, increased restrictions on restaurant capacities and closed bars. It’s created a logistical nightmare.
Which businesses got Paycheck Protection Program loans?
The numbers are in — well, at least in part. The federal government has released the names of companies that received loans of $150,000 or more through the Paycheck Protection Program.
Some of the companies people are surprised got loans include Kanye West’s fashion line, Yeezy, TGI Fridays and P.F. Chang’s. The companies you might not recognize, particularly some smaller businesses, were able to hire back staff or partially reopen thanks to the loans.
You can find answers to more questions on unemployment benefits and COVID-19 here.
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