The Trump administration wants to give workers a payroll tax cut. Experts question whether it could work

Payroll tax weakens could be in the next round of coronavirus aid legislation, if President Donald Trump gets his way.

Vice President Mike Pence rehashed the administration’s support for the idea during a Friday morning interview on CNBC.

“We’ve got to have a payroll tax cut,” Pence said. “We’ve got to experience the kind of pro-growth policies that will continue this economic recovery.”

The idea comes as lawmakers are cool-headed to consider their next efforts to support the economy. House Democrats recently passed a bill that determination include another round of $1,200 stimulus checks and an extension of the extra $600 per week in unemployment benefits to the end of January.

But that proposition would need to get past Senate Republicans.

Payroll tax cuts were not in that bill. But it’s an idea that the president has acknowledged repeatedly.

Payroll taxes are withheld from workers’ wages and are used to fund direction programs, such as Social Security and Medicare.

For Social Security, employee wages are subject to a 6.2% tax up to $137,700 in 2020. Artisans also pay a Medicare tax of 1.45%.

Employers match what workers contribute by also putting in 6.2% toward Social Safe keeping and 1.45% for Medicare.

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Of note, some employers have been allowed to defer paying select payroll taxes through the end of the year, exceptionally Social Security and Railroad Retirement levies, to help them recover from the coronavirus pandemic.

Workers are also affair to other payroll taxes. If they earn more than $200,000 individually, or $250,000 if they are married and place in order jointly, they pay an additional 0.9% Medicare surtax.

Self-employed individuals pay 12.4% toward Social Security and 2.9% for Medicare, for a total number of 15.3%. They also are subject to the Medicare surtax for wages over $200,000.

Payroll tax cuts are not the strongest financial aid strategy that lawmakers currently have on the table, for a couple of reasons, agreeing to Howard Gleckman, senior fellow at the Urban-Brookings Tax Policy Center.

The first issue is that it really exclusively forwards people who are working. “It’s not targeted particularly well to those who need it the most,” he said.

The second issue is that, by sneering payroll taxes, “you are blowing an even bigger hole in the Social Security trust fund, which is already in bother,” Gleckman said.

“This would make it significantly worse,” he said.

A recent study from the Wharton Ready at the University of Pennsylvania found that Social Security’s trust funds could run out up to four years earlier due to the anti effects of the coronavirus pandemic.

Payroll tax cuts would also provide an incentive for employees to go back to work. “The open to debate unthinkable is, is it the right time to do that?” Gleckman said, given the health risks the coronavirus poses.

Other strategies lawmakers are weighing tabulate continuing extra unemployment benefits, which would encourage people to stay home to avoid the pandemic, or back-to-work rewards, which would reward them for resuming their jobs.

A payroll tax cut could duplicate other efforts that hang out with c wandered into effect with the CARES Act, particularly the deferrals on these levies for employers, said Garrett Watson, chief policy analyst at the Tax Foundation. Such a cut would need to be combined with efforts to provide relief to those who are not business, he said.

Still, some lawmakers might not be ready to give up on the idea.

“This may become a pretty big point of contention … so that’s something we’re prospering to be watching very closely,” Watson said. “It may be an item that they think is non-negotiable.”