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President Trump recently signed several executive orders that are designed to boost the economy and provide relief to people who have been financially hurt by the pandemic. One of the orders was a payroll tax cut. However, experts still have a lot of questions about this payroll tax cut. Many people wonder how and when the deferred taxes will be collected if this is not permanent. The president will not be able to make this permanent without congressional approval.
Most economists are not a fan of the tax cuts. They stated that it has limited effectiveness because it does not help people who are unemployed or retired. It also does not help other people who are out of the workforce. However, this is something that the Trump Administration has pushed for since the coronavirus pandemic began.
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The Tax Foundation has stated that the payroll tax holidays have a mixed record. In March, the Trump administration wanted to temporarily defer the collection of Medicare and Social Security taxes. The executive order seems to be similar to a plan that was put in place in 2011 and 2012. The plan reduced the amount of payroll tax that people paid by two percentage points.
However, the 2011 and 2012 payroll tax place did not directly come from the White House. It was put in place by Congress. The money was also taken from the Treasury general fund and transferred to the Social Security Trust Fund. This is something that Congress has to authorize.
No one knows whether Corporate America will agree to this. The press has reached out to Target, Walmart, CVS, United Healthcare and Apple. However, none of the companies have returned the request for comment.
There are also a lot of legal challenges that the president will face. There are Democratic lawmakers who do not approve of the president going around congress. There are also states that would be required to cover some of the funding. The states’ budgets have already been burdened by a decrease in tax revenue and increase in public health costs.
Furthermore, companies say that they do not want to be caught in the middle of this. Garret Watson is a senior policy analyst who works at the Tax Foundation. He stated that the payroll tax cuts have several unanswered questions. He wants to know when the deferred taxes will have to be paid back.
Accounting departments also do not know how to handle this change. They do not know how a deferral should be implemented. They also do not know whether they will have to take the money from the workers or pay it back themselves.
Mark Hamrick is a senior economic analyst at Bankrate.com. He stated that many payroll processing firms are finding this change difficult to implement. Charles Elson works at the University of Delaware and is the director of Corporate Governance. He is concerned because the payroll tax cuts are not free money. He also stated that there is a lot at stake.
Eric Toder works at Urban-Brookings Tax Policy Center and is the co-director there. He stated that businesses do not want to be in a position where they have to withhold several months of payroll taxes from their employees at the same time.
Doug Larocca is a 28-year-old who lives in Baltimore. He works in marketing. He is not a fan of the payroll tax cut either. He stated that it does not do much to help people who have lost their jobs. He also does not want to have a surprise tax bill. He said that he would rather have the government work out something that will help people who are working and struggling.
