POLITICO reports that President Donald J. Trump has “signaled” that he may veto any new COVID-19 stimulus package that does not include a payroll tax cut.
- Up to this point, Trump’s payroll tax cut goal has “fallen on deaf ears” among both Republicans and Democrats in Congress.
- However, according to sources who participated in a conference call, Vice President Mike Pence instructed Republican lawmakers that they should be advocating for a payroll tax cut.
- White House officials reportedly have also been communicating with Senate Republican leaders about unveiling elements of a new relief bill next week. However, it is unclear whether Senate Majority Leader Mitch McConnell (R-KY) plans to include the new bill in the current package, and Senate Finance Committee Chair Chuck Grassley (R-IA) has signaled he does not like the idea.
- Civilian opponents of the White House push for payroll tax cuts argue that the policy will accomplish little and ultimately sets the government on a course toward defunding social security.
Nancy Altman, president of Social Security Works, said the following in a July 16 statement:
Donald Trump… [has] stated his intentions to hold any Congressional relief package hostage for his top priority: Defunding Social Security by starving it of its dedicated revenue.
As economic stimulus, this approach makes no sense. Payroll tax cuts waste money, delivering the wealthy and powerful the largest cuts while providing nothing to those who need it most, such as the millions about to lose their COVID unemployment benefits.
- The Center for Budget and Policy Priorities reports that the several variations on payroll tax cut proposals floated by the administration include temporary eliminations of both the employer and employee share of the tax, although Trump has also expressed interest in a “permanent” cut, Common Dreams adds.
- However, employer tax cuts would give the “most relief (in dollar terms)” to wealthier Americans who will be more likely to save the money and less likely to spend it, having little impact on the economy and little change to their own lives.
- And business spending is also unlikely to increase with an employer payroll tax cut because diminished demand from consumers who have lost income reduces incentive to hire employees and spend in the economy. Businesses are thus more likely to save money rather than spend in a recession, leaving the tax-based relief “wasted.”
The Center explains,
Relief measures are most effective as economic stimulus if they quickly deliver resources to people and businesses that most need it and so are most likely to spend rather than save any extra dollars they receive, thereby shoring up consumer demand and reducing the recession’s depth and length.