A month after President
No major private employer has stepped forward with plans to forgo withholding the levy from workers’ paychecks -- as Trump’s action allowed from Sept. 1 through year-end.
Even the House of Representatives
Trump had pushed his payroll tax deferral and a tandem executive move on supplemental unemployment insurance benefits to make up for the failure of Congress to pass additional pandemic relief. With lawmakers increasingly unlikely to approve more stimulus before the election, the consequences of limited income support are growing more pronounced.
The complexity of administering the payroll levy deferral and worries about having to pay back the tax next year have left companies hesitant.
Growth Risk
“Employers don’t see any benefit to their employees from the payroll tax deferral, and to implement it they would bear significant administrative costs and risks,” said
With support payments from the last fiscal stimulus having expired in July,
Part of the challenge for the White House is it can’t unilaterally cut taxes, and can only defer the due date. Internal Revenue Service guidelines left employers on the hook to pay back the payroll levy early next year -- effectively doubling withholding from employees’ paychecks.
Particularly for companies with large numbers of low-wage workers where turnover is high, taking up the option of deferral raised the question about how to get money owed from people who had left.
Other challenges include calculating the precise amount of payroll tax to pay back by next April, said
“If there are under-payments, discrepancies or reconciliation problems, the IRS can assess interest, penalties and additions to tax beginning May 2021 -- for which employers would be liable,” Isberg said.
Federal Delay
Even the federal government needed some time to recalibrate. It said it wouldn’t stop withholding the taxes until mid-September, about two weeks after the start date for the deferral period.
A Treasury Department spokesperson declined to comment on the take-up of the initiative.
Trump’s August directive delayed the payroll tax due date for the 6.2% Social Security taxes for those making less than $4,000 bi-weekly, which amounts to about $104,000 a year. It was his latest attempt to achieve a second tax reduction after criticism that the 2017 Republican tax overhaul didn’t do enough to help middle class workers.
Lawmakers did endorse a deferral of the portion of payroll taxes that’s paid by companies -- not employees -- and it was part of the last stimulus package, approved in March. That measure was easier for employers to administer, and acted as a temporary liquidity aid.
On Twitter Thursday, Trump reiterated his pledge to seek the cancellation of the deferred payroll tax should he win reelection.
Congress Balks
He can’t do that without the approval of Congress, and he has repeatedly asked lawmakers to cut payroll taxes.
Yet both Republican and Democratic leaders have rejected permanent cuts to the tax, because it could compromise the long-term solvency of Social Security retirement benefits.
The temporary deferral means that even if companies embrace the Trump action more broadly, the impact on spending may be limited.
“People are not super sensitive to small changes in their paychecks,” said Mattie Duppler, the president of consulting firm Forward Strategies. “But doubling the payroll tax when executive order expires will certainly be noticed by employees.”
For his part, Senate Majority Leader
“I wish I could tell you we’re going to get another package,” McConnell said on a visit to a Kentucky hospital. “But it doesn’t look that good right now.”
(Adds McConnell skepticism over fiscal stimulus in final two paragraphs.)
--With assistance from
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Christopher Anstey, John Harney
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