COVID-19

Trump’s payroll tax holiday sows confusion

Mitchell Hartman Aug 10, 2020
Heard on:
HTML EMBED:
COPY
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
Heard on:
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
HTML EMBED:
COPY

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

Millions of Americans are unemployed, but businesses say they are having trouble hiring. Why?

This economic crisis is unusual compared to traditional recessions, according to Daniel Zhao, senior economist with Glassdoor. “Many workers are still sitting out of the labor force because of health concerns or child care needs, and that makes it tough to find workers regardless of what you’re doing with wages or benefits,” Zhao said. “An extra dollar an hour isn’t going to make a cashier with preexisting conditions feel that it’s safe to return to work.” This can be seen in the restaurant industry: Some workers have quit or are reluctant to apply because of COVID-19 concerns, low pay, meager benefits and the stress that comes with a fast-paced, demanding job. Restaurants have been willing to offer signing bonuses and temporary wage increases. One McDonald’s is even paying people $50 just to interview.

Could waiving patents increase the global supply of COVID-19 vaccines?

India and South Africa have introduced a proposal to temporarily suspend patents on COVID-19 vaccines. Backers of the plan say it would increase the supply of vaccines around the world by allowing more countries to produce them. Skeptics say it’s not that simple. There’s now enough supply in the U.S that any adult who wants a shot should be able to get one soon. That reality is years away for most other countries. More than 100 countries have backed the proposal to temporarily waive COVID-19 vaccine patents. The U.S isn’t one of them, but the White House has said it’s considering the idea.

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.

Read More

Collapse

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.