Trump’s payroll tax break undercuts Social Security, Dems say

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Coronavirus - Recipients of Social Security will get stimulus payment

Trump's order is also optional for employers

Democrats are criticizing President Donald Trump’s recent series of executive actions that would in part defer Social Security payroll taxes for workers earning less than $100,000 a year, calling it a broken campaign promise he made in 2016 not to touch Social Security and Medicare.

The president’s unilateral move to provide economic relief amid the coronavirus pandemic, they say, affects how retirement benefits are paid for and would ultimately cut the social safety net for millions of Americans.

Outside experts are also sounding an alarm about Trump’s plan.

The action could lead to the delay in $100 billion in payments to the Social Security Trust Fund, according to an updated estimate by the nonpartisan Committee For A Responsible Federal Budget, which advocates for reducing government deficits.

“What it does is undercut Social Security,” said Rep. John Larson, D-Connecticut, who is chairman of the House Ways and Means subcommittee overseeing the retirement program. He added that Trump “is defunding Social Security and breaking his promise. ... He will say, ‘I’m not doing anything to touch Social Security, I’m just deferring this,’ but it’s as clear as my hand in front of me.”

Trump signed an executive order and three other memos Saturday after the White House failed to strike a deal with Democrats in Congress following several weeks of talks on a second stimulus measure.

Democrats have seized on the president’s action that, during the last three months of the year, defers 6.2% of employee payroll taxes, which are earmarked to pay for Social Security and Medicare.

The payroll tax deferral, however, is optional for employers, and talking heads around Washington said they doubted any would participate if there was potential for tax liabilities.

Trump’s other measures defer student loan payments, discourage evictions and provide enhanced unemployment benefits if states agree to contribute money to the program.

Just how much relief employees receive and the overall impact remains to be seen.

The benefit will largely depend on the discretion of states, landlords and employers, according to The Associated Press. On the payroll tax, for example, many employers aren’t expected to make a change to employee withholdings because the same amount of money will still be due by the end of the year.

Separately, there is also speculation about whether Trump even has the constitutional authority to extend federal unemployment benefits by executive order. Equally up in the air is whether states, which are necessary partners in Trump’s plan to bypass Congress, will sign on.

“It is far from clear that the payroll tax holiday will achieve its intended objective of, as the president said, ‘save American jobs and provide relief to the American workers,’” Mark Hamrick, senior economic analyst for Bankrate.com, said in a statement. “First, the action is a deferral of these taxes, not an elimination of them. So, the bill is still due, it just isn’t due in the short-term. Let’s remember it is the unemployed who need help, not so much Americans who are still working and who’d get the benefit.”

Since Trump signed the directives over the weekend, the Democratic National Committee has released a propaganda video accusing Trump of reneging on a critical campaign issue.

Trump has said if he wins reelection he would continue the extension on the tax cut, though he did not say how — or what he would do to offset any potential impact on Social Security funding.

The White House on Monday fired back at criticisms and defended the president’s actions.

“Providing a payroll tax deferral poses no risk to the Social Security Trust Fund and puts more money in the pockets of hardworking Americans as we fight to end this pandemic from China and rebuild our economy safely,” spokesman Judd Deere said in a statement. “This has been a priority for President Trump and while congressional Democrats played politics the president acted for the forgotten men and women of this country as he has done so many times before.”

With more than 60 million beneficiaries, Social Security is funded by a 12.4% payroll tax evenly divided between employees and employers. But there’s a cloud over the program’s long-term finances, and even before the pandemic, government experts estimated it would be unable to pay full benefits starting in 2035. Medicare’s hospital fund is also financed by a payroll tax, but that’s not affected by Trump’s directive.

Social Security and Medicare are seen as politically untouchable. It’s not just that seniors have clout in elections, but the two programs have long-standing intergenerational support.

A payroll tax break is not a new idea. Congress approved a temporary cut in the Social Security tax during the Obama years, in the aftermath of the 2007-09 recession. That cut was 2 percentage points. Republican voices on social media called out Democrats for supporting the payroll tax cut at the time.

— Information provided by The Associated Press was used to supplement this report.