Millions of Americans have been in financial trouble since the start of the COVID-19 pandemic, and although unemployment has reached record levels, not everyone has lost a job. It is these people that President Trump is specifically trying to help.
Earlier in the month, the president signed an executive order requesting a September 1 tax delay and through the end of the year. Trump had asked to see a tax cut in a second incentive action, but lawmakers ruled it out in particular – so the president decided to take matters into his own hands.
Normally, employees pay 6.2% of up to $ 137,700 of income toward Social Security taxes and 1.45% of all their income toward Medicare taxes. Employers then agree to those taxes themselves.
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President Trump is now seeking to allow workers earning a maximum of $ 104,000 a year to defer those Social Security taxes from September to the rest of 2020. As such, someone earning $ 104,000 a year would $ 124 extra shown in his or her September weekly salary, for a total of $ 2,232 in temporary savings.
But notice the “temporary” there. The reason? President Trump’s executive order does not completely forget that tax burden; it just sends them to a later date. And that’s just one reason why his plan, while perhaps well-intentioned, may not be all that effective in the end.
A limited influence
President Trump has promised to forgive deferred payroll tax between September and the end of the year if he is re-elected. But whether he has the authority to do so is still up for debate. And if those taxes are not forgiven, postponing them may not really do much to improve the typical financial picture of the worker.
Anyone struggling financially today is unlikely to be in a substantially better place in the first part of 2021, when those tax services would actually come in conjunction with the deadline for filing taxes. But even if that tax service is completely forgiven, that still does not help the millions of Americans who are currently without a job. At the moment, it is fair to say that unpaid workers need the most help, and that while the president the sign a separate executive order requesting stimulating unemployment, which can also provide only minimal relief.
The purpose of offering a tax deduction is to give workers a higher wage, allowing them to pump more money into an economy that is in a recession. But temporary forgiveness of those taxes cannot achieve that goal.
Workers are likely to be reluctant to pay their incentive, knowing that in the not-so-distant future they will have a tax burden on their hands, while those who to do spending that money can easily get into trouble next year if it turns out that those taxes are not eligible for forgiveness. It is for these and other reasons that legislators have in the first place opted for damages for payment transactions – despite the president insisting on one of them.
