Trump’s Fake Payroll Tax Cut Is A Big Mess

Discussion in 'Politics' started by FryDaddyJr, Oct 21, 2020.

  1. FryDaddyJr

    FryDaddyJr Well-Known Member

    In August, President Donald Trump took unilateral action to help the economy weather the coronavirus pandemic by putting more money in people’s pockets: The government would take less money out of every paycheck by deferring payroll taxes, essentially giving everyone a raise.

    Trump has loved the idea of juicing the economy with a payroll tax cut, just like his predecessor Barack Obama did from 2011 through 2012. Congress wouldn’t go along with Trump’s proposal, however, so the president did it himself.

    But there was a catch with Trump’s plan ― the money would have to be paid back next year, meaning it’s not a tax cut so much as a deferral.

    Most private employers appear to have opted out of the scheme, citing its administrative difficulty, and so did the U.S. Postal Service. But Trump decided to force it on his own workers — more than amillion employees of the federal government.

    Now, those civil servants must deal with the headaches of a loan they never asked for.

    The tax deferral applies to the employee’s share of Social Security taxes, amounting to 6.2% of wages, which for most workers is withheld by their employer. The executive action increases their biweekly paychecks from September to the end of the year. But unless Congress and the White House forgive those loans through legislation, workers will have to return the money through payments or higher withholdings — and smaller-than-usual paychecks — in 2021.
    Personal Finance for Dummies would advise a worker to figure out how much extra money they’re receiving now and set it aside under the assumption that Uncle Sam will expect it back in a few months. Not only does that discipline create some annoying administrative tasks, it defeats the shaky justification for the policy: to pump stimulus into the economy.

    Michael Knowles, an employee in the U.S Citizenship and Immigration Services and the president of his union, the American Federation of Government Employees Local 1924, said the whole thing really is as pointless as it sounds.

    “No one that I’ve talked to can figure out how this helps,” said Knowles, speaking in his role as a union representative. “This is supposed to be the president’s way of helping us get through a rough spot due to COVID-19. This is not any kind of relief at all. It’s just another, at best, distraction, but at worst it could put [people] in a financial bind.”

    Knowles has been advising confused union members to go through their past paystubs to determine how much additional pay they’re getting and to plan for a lean 2021. He said his agency put out a frequently-asked-questions document for employees that wasn’t all that helpful. He doesn’t blame the agency — the Trump administration hasn’t made clear how it’s supposed to work.

    An FAQ memo from the Department of the Interior shows how little information employees have to go on. It says workers should plan on paying the money back through withholdings next year, but it’s sketchy on how much will be collected from each paycheck, and how tax penalties will apply: “As more information becomes available ... it will be shared with the workforce.”

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