The payroll tax cut has been a constant priority for the Trump administration during the coronavirus crisis. What has varied is the intensity at which Trump has pushed the idea.
On March 13, the president tweeted that “only” the payroll tax cut will make a big difference. The idea didn’t get traction at the time and Trump seemed resigned to that fate as recently as last week. “The Democrats did not want to give it to us, so we went a different way, which is fine,” he said.
The tone abruptly changed again last Sunday when the Trump laid out an ultimatum about the next response bill. “[W]e're not doing anything unless we get a payroll tax cut,” he said. He followed up with a tweet listing the idea among his top priorities.
Well run States should not be bailing out poorly run States, using CoronaVirus as the excuse! The elimination of Sanctuary Cities, Payroll Taxes, and perhaps Capital Gains Taxes, must be put on the table. Also lawsuit indemnification & business deductions for restaurants & ent.
— Donald J. Trump (@realDonaldTrump) May 5, 2020
In recent days, it’s become clear that what hasn’t changed is the lack of enthusiasm for the idea around Washington.
House Speaker Nancy Pelosi, as she’s done each time it has come up, shot down the idea in no uncertain terms. During an appearance on CNN on Monday, she was asked if a payroll tax cut was OK with her: "No, it is not," she said. She dismissed it as the latest "thing of the day that spews forth from the White House."
Key Republican lawmakers are also lukewarm on the idea.
Trump’s often-shifting argument for the cut
Trump’s argument for a payroll tax has varied over the last few months. On March 13, he tweeted that a payroll tax cut would “get money into the hands of people quickly & efficiently.”
If you want to get money into the hands of people quickly & efficiently, let them have the full money that they earned, APPROVE A PAYROLL TAX CUT until the end of the year, December 31. Then you are doing something that is really meaningful. Only that will make a big difference!
— Donald J. Trump (@realDonaldTrump) March 13, 2020
A few days later, as it became clear the idea was not going to be included, the president acknowledged that a payroll tax cut might not speed a lot of money into the economy quickly. The cut “does come over a period of months, many months, and we want to do something much faster than that,” he said during a briefing on March 17.
By April, he was again noting speed. “You'd get a lot of people a lot of money immediately,” he said on April 7. He followed up the next day by saying it “would be almost immediate and it would be over a little bit of an extended period, which is a good thing, too.”
During his most recent push, Trump focused on the idea that a payroll tax cut would help businesses and the economy during a long recovery.
“It would really be an incentive for people to come back to work and for employers to hire,” he said last week. Then, during the Fox News town hall where he laid down his ultimatum, he said it “is so important to the success of our country and to the following year.”
‘I’m not a particular fan of that’
At the moment, indifference from members of both parties to the idea appears to be winning out (again) over the administration’s push. Reporters on Capitol Hill recently found a parade of key Republican lawmakers hesitant to embrace the idea, preferring instead to focus on other priorities.
“I’m not a particular fan of that” is how Senate Majority Whip John Thune (R-S.D.) put it.
Lawmakers are skeptical that the move is an effective way to get money to people who need it most; they also note it would do nothing for unemployed Americans (more than 30 million of whom have filed for unemployment benefits over the past six weeks).
“I’ve never thought that really would be effective” said Sen. Susan Collins (R-Maine) to reporters.
Some conservative commentators who align with the administration on some other issues have also been arguing against the idea for weeks.
Another reason for hesitancy is the impact a cut – either temporary or permanent – would have on funding for Social Security and Medicare. Those programs rely on those taxes collected and already face funding shortfalls as soon as “this decade,” according to one report.
The current payroll tax rate for Social Security is 6.2% for the employer and 6.2% for the employee, or 12.4% total. The current rate for Medicare is 2.9%, also split between employee and employer.
Rep. John Larson (D-CT.) is one of the main Democratic voices on Social Security. He responded to Trump’s comments this week by saying that the move “may seem appealing but would actually weaken Social Security and greatly benefit corporations, while hurting those who need its benefits the most.”
An idea that might be gaining steam in the place of a payroll tax cut is something more ambitious: paycheck support where the government would simply reimburse employers for payroll and benefit costs.
A group of Democrats are pushing the idea to send grants directly to businesses. Pelosi has signaled her support for some version of that approach. Republican lawmakers, like Missouri Sen. Josh Hawley, have outlined an idea to send money to workers via a payroll tax rebate.
Ben Werschkul is a producer for Yahoo Finance in Washington, DC.
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