December 26, 2020 - Douglas Myser

Trumps payroll tax deferral. President Trump's decision to defer payroll taxes until the end of the year is leaving challenges for lawmakers to mange after he leaves office in January, and they haven't figured out what-if anything to do. Members of Congress in both parties weren't keen on the August executive action, which let employers stop collecting the 6.2% Social Security payroll tax from many workers in the final four months of 2020. The move was meant as a form of relief during the economic slump caused by the coronavirus pandemic, but few employers stopped withholding. That created a predicament for Congress. Employers whose payroll taxes temporarily shrank will face double withholding starting in January, which could pinch households that haven't planned for it. Trumps payroll tax deferral.

Doing nothing could cause harm for those workers, but helping only them could be unfair to others whose taxes continued to be withheld. "No one will be happy no matter how that gets resolved," said Mark Mazur, a former Obama administration official who now directs the Tax Policy Center. "It's kind of like a no-win thing." Mr. Trump couldn't get Congress to cut payroll taxes, so he used the administration's ability to defer tax deadlines after a disaster to delay payments of the employees portion of Social Security taxes. He promised that if he won re-election, he would push to turn that delay into a real tax cut.

The government offer applied to people making $104,000 or less, who could have as much as $2149 in taxes deferred. But most employers balked, wary of potential complexities and costs of deferring the tax and arguing that the deferral amounted to little more than a short term, no interest loan. "President Trump was waving his arm and saying don't worry about it. You do worry about it," said Rep. Richard Neal (D. Mass) chairman of the tax writing House Ways and Means Committee.