President Donald Trump speaks on “Rebuilding America’s Infrastructure: Faster, Better, and Stronger” in Atlanta on July 15.
Jim Watson | AFP | fake pictures
His salary could increase if the White House gets away with it.
President Trump said this week that he will not sign the next coronavirus relief package if it does not include a payroll tax cut for workers, according to published reports. However, his past calls to take this route to help people during the continuing economic crisis have met with opposition from Republicans and Democrats.
“Both sides have said it is not well run,” said Garrett Watson, a policy analyst at the Tax Foundation. “The benefits would come primarily for people who are already working, and we currently have record unemployment.”
As the U.S. economy continues to struggle amid the pandemic and new jobless claims still top a million a week, Republican-dominated Senate lawmakers are expected to present their version of a stimulus bill next time. week.
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Other strategies lawmakers are weighing to help Americans include extending additional unemployment benefits, which critics say could encourage people to stay home to avoid the pandemic or bonuses for returning to work, which would reward them for resume your work.
You and your employer divide payroll taxes, which are used to fund government programs, largely from Social Security and Medicare. Those taxes are above your federal and state tax withholdings.
For Social Security, 6.2% of your salary, up to $ 137,700 by 2020, is withheld from your paycheck and sent to the IRS, and your company also remits an equivalent amount to you. In other words, the IRS receives the equivalent of 12.4% of your salary to maintain Social Security.
For Medicare, you and your business each chip at 1.45%, with no limit on wages subject to that portion of payroll taxes. In fact, an additional 0.9% Medicare tax is withheld for income over $ 200,000.
Self-employed workers pay both the employer and employee shares, but can generally deduct half on their tax return.
For example: if a worker did not pay payroll taxes of $ 10,000, it would mean getting an additional $ 765 during the months that the payroll vacation was in effect.
While it’s unclear whether a payroll tax cut or suspension will go into the next congressional stimulus package, or exactly what it would look like, Trump has suggested in the past that the entire payroll tax should be suspended for the rest of the year. .
Proponents have argued in part that higher salaries would help encourage people to return to work and stimulate the economy by putting more cash in people’s pockets.
However, if that happened, it might not be lasting.
“The policy would be temporary,” said Watson. “Even if we saw growth, it would disappear when politics disappeared in six months or a year.”
Already, the economic stimulus legislation enacted in March allows some employers to defer payment of part of their payroll taxes until the end of the year.
Some experts have also expressed concern about the effect a payroll tax exemption would have on Social Security and Medicare, which continue to face funding gaps.
The annual report of the Social Security Trustees, released in April, said that the trust funds could be depleted in 2035, at which point the system will be able to pay 79% of the promised benefits. Medicare Part A (hospital coverage) funds are expected to be depleted by 2026 and to cover 90% of benefits. However, some experts think that the current economic crisis could make those deficits come sooner.
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