TRUMP AND THE PAYROLL TAX CUT

Trump and the payroll tax cut, President Donald Trump's blitz of executive orders includes a promise of tax relief for workers, but policy experts say the White House has left several critical questions unanswered, including who will be responsible for collecting the deferred tax and how and when it will need to be paid off in the event that it is not made permanent, which Trump cannot do without congressional approval. Most economists--along with lawmakers on both sides of the aisle--have been lukewarm about a payroll tax cut, pointing to its relatively limited effectiveness, since it doesn't help people who are unemployed, retired or otherwise out of the workforce. But the Trump administration has steadily pushed for one since the early days of the pandemic. "Payroll tax holidays have a mixed economic record", the Tax Foundation noted in March, when the Trump Administration first floated a temporary deferral in collecting the taxes that fund the Social Security and Medicare programs. Trump and the payroll tax cut.

At first glance, the executive order might seem similar to a provision in 2011 and 2012 that reduced workers portion of the payroll tax by two percentage points. But that earlier tax cut was legislated by Congress rather than coming out of the White House, and the monetary difference was made up by a transfer from the Treasury's general fund to the Social Security Trust Fund--a move that only Congress can authorize, despite Trump's assurance of forgiveness. It is far from clear to what extent corporate America will sign on to the plan sketched out in the executive order. Walmart, Target, McDonald's, CVS, United Health Care and Apple all did not respond to requests for comment about it or how they would implement a payroll tax deferral.

The order is certain to face legal challenges, both from Democratic lawmakers who oppose Trump's strategy of attempting to bypass Congress, as well as from states, which the order would compel to cover some of the funding shortfall, even though their own budgets have been burdened with public health costs.

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