Despite questions, President Trump is issuing an executive order to make temporary tax cuts tax cuts

On August 6, 2020, the Senate met without passing an incentive package. Senate Majority Leader Mitch McConnell (R-KY) was not involved in the talks, prompting Senate Minority Leader Chuck Schumer (D-NY) and Second Chamber member Nancy Pelosi (D-CA) to work directly with Treasury Secretary Steve Mnuchin and Wite House Chief of Staff Mark Meadows. As of Friday night, the parties reported that they had not reached an agreement.

Today, President signed frustrated with the inactivity of Congress Executive Orders that would change the current schedule.

Among them? A deduction from tax service. Specifically, the Order states:

To that end, I urge the Secretary of the Treasury today to use his authority to defer certain payroll taxes to the most needy American workers. This modest, targeted action will put money directly into the pockets of American workers and generate additional incentives for work and employment, just when the money is most needed.

You can read the full Order here.

Earlier, gurus of tax policy – from right and left – had been waiting, with many doubting whether President Trump had the authority to act on tax filing tax returns. Most tax experts believe that only Congress has the power to stop the collection of taxes.

The authority to take action can be found in the Tax Code, specifically in section 7508A which begins: In the case of a taxpayer determined by the Secretary to be affected by a federally declared disaster (as defined by section 165 (i) (5) (A)) as a terrorist or military action (as defined in paragraph 692 (c) (2)), the Secretary may specify a period of up to 1 year which may be disregarded in determining, under the Internal Revenue Acts, in respect of each tax liability of such taxpayer—

This typically limits relief for specific geographic areas. However, on March 13, 2020, the President of the United States issued an emergency declaration under the Robert T. Stafford Disaster Relief and Emergency Assistance Act in response to the ongoing Coronavirus Disease 2019 (COVID-19) pandemic (Emergency Declaration). In other words, anywhere in the United States currently qualifies as a disaster.

The same section of the Tax Code was quoted when the filing date of the tax season was extended from April 15 to July 15.

But here’s what worries some tax policy experts: the president may have the power to postpone the collection of the tax service under the Code Internal Internal Revenue, but not the power to forgive those taxes. That authority is given only to Congress. The Executive Order recognizes so much, and states: The Secretary of State for the Treasury will examine adventures, including legislation, to implement the obligation to pay the deferred taxes based on the implementation of this memorandum.

To be clear, the President is asking the Treasury to see if that tax return can be waived. For now, however, the Executive Order only allows postponement. This means – without further action – that the taxes must be paid. The proposal is effective for the period from 1 September 2020 to 31 December 2020.

Some tax experts also asked earlier this week if the president had the authority to put caps or limits on the proposal. But that’s exactly what happened here. The Executive Order states that the relief is limited to “each employee the amount of which his salary or compensation, if applicable, is payable in each fortnightly payment period is generally less than $ 4000, calculated on the basis of tax,” as the equivalent amount regarding other payment periods. “This generally works to a limit on those who make more than $ 100,000 annually. Adopting a full-time job means the average worker is able to pay just under $ 1,000 for the term of the job, or about $ 80 / week.

Everyone else is still responsible for collecting, withholding and refunding taxes. How this will apply to workers with more than one job (as with side appearances) is not yet clear. The executive order has appointed Treasury to issue guidance on the matter.

Another potential problem? Those tax funds for pay are generally paid into the Social Security and Medicare Reimbursement Funds (which is why we call them “trust fund taxes”). Historically, Congress has appropriated general revenues for funds in making tax cuts on payment transactions so as not to limit social security and Medicare trust funds. That is not what is happening here, although remember that for now this is just a proposal. Normally, a proposal just catches the eye under the road. But President Trump signaled that this could be a proposal earlier today, stating, “If I win on November 3, I plan to forgive these taxes and make permanent cuts to the tax bill … I will make them all permanent. “

What that means for Social Security and Medicare in the future is not clear, and seems to be in line with President Trump’s assurance in 2015 that ‘I’m not a cutter. I will probably be the only Republican who does not want to reduce Social Security. ”

He succeeded in 2015 tweetjen: I was the first & only potential GOP candidate to declare that there will be no cuts on Social Security, Medicare & Medicaid. Huckabee copied me.

In 2017, Reince Priebus, clearly stated on CBS
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‘Face the Nation:’ I do not think President-elect Trump wants to interfere with Medicare or Social Security. He made a promise during the campaign that this was something he did not want to do. ”

However, paying taxes pays Social Security and Medicare programs. It is not clear where the money would come from if tax deductions were made in permanent cuts. You can read more here about tax cuts.

And the problem even more confusing? Under the CARES Act, employers can already defer the guarantee and payment of the employer’s share of the social security tax. The proposal applies to deductions and payments from the employer’s share of Social Security taxes that would otherwise have to be made in the period beginning on 27 March 2020, and ending on 31 December 2020, half of which should be on 31 December 2021, and the rest delayed on 31 December 2022. The relief also applies to the self-employed.

I know … I know … My tax colleagues are already complaining about what those tax forms of payments might look like.

There’s a lot to tackle here, so stay tuned: more will surely come.

The latest tax cut for U.S. workers was passed by the Obama administration in 2011, despite concerns that the cut would increase the federal deficit. The theory was then – as now – that the benefit offset all costs. After the first round, Congress renewed the temporary tax cuts in 2012.

In response to the Executive Order contained sen. Ron Wyden (D-OR) tweeted: This scheme is a classic Trump con: play by leadership while robbing families of the support they need. This “plan” fails to recapture supercharged unemployment, and would throw already exaggerated state programs into chaos, making it harder to get benefits out the door.

For more on payroll taxes – and what payroll tax cuts have traditionally looked like – check out this previous article. I will keep you updated as more information becomes available.