COVID-19

Trump’s payroll tax holiday sows confusion

Mitchell Hartman Aug 10, 2020
Heard on: Marketplace
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President Donald Trump signs an executive order and three memorandums extending coronavirus economic relief on Aug. 8. How the payroll tax holiday would benefit Americans remains unclear. Jim Watson/AFP via Getty Images
COVID-19

Trump’s payroll tax holiday sows confusion

Mitchell Hartman Aug 10, 2020
President Donald Trump signs an executive order and three memorandums extending coronavirus economic relief on Aug. 8. How the payroll tax holiday would benefit Americans remains unclear. Jim Watson/AFP via Getty Images
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President Donald Trump signed one executive order and three memorandums this past weekend after negotiations on another economic support plan on Capitol Hill collapsed.

Whether the president can actually do most of what he did depends on whom you talk to. So rather than engage in that particular back and forth, we’ll focus on the thing he did that he can do: deferring collection of payroll taxes.

Specifically, that means pausing taxes on the employee portion of Social Security, 6.2% per paycheck. It starts Sept. 1 and goes through the end of the year, but only for people making less than about $100,000 a year.

The Committee for a Responsible Federal Budget wades through complicated tax proposals and regulations all the time. But Maya MacGuineas, the committee’s president, said the White House’s Memorandum on Deferring Payroll Tax Obligations leaves her with “question mark, question mark, question mark.”

Starting with this: What happens come January when employee payroll taxes that weren’t collected come due?

“Nobody knows how the repayment part will have to be restructured,” MacGuineas said. “It’s going to complicate the life of employers tremendously — if they have to be responsible for making sure that money gets paid back.”

And small business tax adviser Barbara Weltman said this payroll tax holiday could change.

“Right now, we’re talking about deferral — you don’t pay now, you pay later,” she said.

The president has instructed the Treasury secretary to explore options including legislation to forgive those payroll taxes altogether. 

Pete Isberg, vice president of government affairs at payroll processor ADP, said it’s going to be really complicated for employers to alter payroll tax collection midyear for only some employees based on a salary threshold. 

“Programming changes of this magnitude normally require, like, six months to do,” Isberg said. “Obviously, it can be done sort of on an emergency basis, but it may be problematic.”

He said employers could be liable for not withholding enough tax and underpaying the Treasury. 

Randy Dellwo, who owns a business that makes scientific instruments in Bend, Oregon, talked with his 10 employees at a Zoom meeting Monday morning.

“The consensus is that everyone would rather not defer their payroll taxes,” he said. “For one thing, they would need to save the money, so they’d have it available to pay back at the end of the year.”

The Committee for a Responsible Federal Budget estimates temporary payroll tax deferment could leave U.S. workers with as much $100 billion of extra pay through December. But if a lot of businesses and employees follow the lead of Dellwo’s company, the impact will be more muted. 

COVID-19 Economy FAQs

What’s going on with extra COVID-19 unemployment benefits?

It’s been weeks since President Donald Trump signed an executive memorandum that was supposed to get the federal government back into the business of topping up unemployment benefits, to $400 a week. Few states, however, are currently paying even part of the benefit that the president promised. And, it looks like, in most states, the maximum additional benefit unemployment recipients will be able to get is $300.

What’s the latest on evictions?

For millions of Americans, things are looking grim. Unemployment is high, and pandemic eviction moratoriums have expired in states across the country. And as many people already know, eviction is something that can haunt a person’s life for years. For instance, getting evicted can make it hard to rent again. And that can lead to spiraling poverty.

Which retailers are requiring that people wear masks when shopping? And how are they enforcing those rules?

Walmart, Target, Lowe’s, CVS, Home Depot, Costco — they all have policies that say shoppers are required to wear a mask. When an employee confronts a customer who refuses, the interaction can spin out of control, so many of these retailers are telling their workers to not enforce these mandates. But, just having them will actually get more people to wear masks.

You can find answers to more questions on unemployment benefits and COVID-19 here.

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