Trump’s payroll tax holiday may haunt workers next year, business groups warn

President Donald Trump’s recent executive action creating a payroll tax holiday for the remainder of the year could boomerang as a higher tax bill for American workers in 2021, the nation’s business leaders warned this week in a letter to Congress and the Treasury Department.

The letter was sent Tuesday by the U.S. Chamber of Commerce and signed by more than 30 trade groups, including manufacturers, restaurants, retailers and building contractors.

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The letter addressed the uncertainty of how Trump planned to compensate for the upcoming shortfall so that workers are not on the hook to pay the money back in the future, CNN reported.

As it stands the president’s plan does not forgive the 6.2% in payroll tax deferment, which is meant for workers who earn less than $104,000 annually.

The letter noted that workers making $50,000 a year could wind up owing nearly $1,100 in payroll taxes in 2021, while those earning the max of $104,000 could be hit with a tax bill of more than $2,200, CNN reports.

“Many of our members consider it unfair to employees to make a decision that would force a big tax bill on them next year,” the letter states.

Trump promised last week to permanently abolish the payroll tax — which largely funds Social Security and Medicare — days after signing an executive measure to defer the tax from September to December.

“On the assumption I win, we are going to be terminating the payroll tax after the beginning of the new year,” Trump said.

Trump made the unilateral moves after lawmakers on Capitol Hill failed to agree on another legislative relief package, saying he wanted to quickly put more money in the pockets of consumers as the coronavirus pandemic continues to pummel the nation’s economy.

The president’s other actions included deferred student loan payments, discouraged evictions and provisions for enhanced unemployment benefits if states agree to contribute money to the program.

Criticism about the president’s plan quickly rippled from Capitol Hill to social media, with the White House maintaining that the tax will be ultimately forgiven without undercutting retirement benefits or greatly adding to the deficit.

“By enacting the payroll tax deferral, President Trump used the authorities available to him to give employers the opportunity to put more money in the pockets of their employees, and he encourages all employers to take advantage of this in order to support hardworking Americans during this period of economic uncertainty as we finish the fight against Covid-19,” said Judd Deere, a White House spokesman.

Democrats immediately accused Trump of breaking a major campaign promise made in 2016 not to touch Social Security and Medicare, and argued his move would ultimately imperil the benefits for millions of Americans.

Additionally, the president doesn’t hold the constitutional authority to cut taxes, although he is able to push back due dates.

And eliminating any tax liability would require congressional approval.

Treasury Secretary Steven Mnuchin told “Fox News Sunday” host Chris Wallace last week that Trump was planning to push Congress for legislation to ensure the deferred payroll taxes are ultimately forgiven.