Trump’s payroll tax cut isn’t what you think it is | Opinion

Posted Sep 25, 2020

By Star-Ledger Guest Columnist
By Eric Houghtaling and Joann Downey

In theory, the payroll tax cut is supposed to put more money in the pockets of employees, and in turn boost the economy that is in desperate need of stimulation. However, 1.4 million people in New Jersey alone have filed for unemployment from March to mid-June and do not receive a paycheck. Extending the payroll tax holiday or terminating the tax would in turn terminate Social Security.

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New Jersey’s employees need help - and so do our residents who have lost their jobs due to this global pandemic. Trump’s payroll tax cut would help neither. It would just make more of a mess of an already hurting economy and could cause the demise of social security.

First of all, the payroll tax is a tax that both the employer and the employee contribute to every year. The money funds Medicare or Social Security. Trump’s executive action means both employers and employees would be exempt for a limited time from paying the social security tax (a total of 12.4% split evenly between them) that is taken from the employee’s paycheck. While this does have the potential of making your paycheck larger by a few dollars, this quick relief for today comes with a much larger cost for the future.

In theory, the payroll tax cut is supposed to put more money in the pockets of employees, and in turn boost the economy that is in desperate need of stimulation. However, 1.4 million people in New Jersey alone have filed for unemployment from March to mid-June and do not receive a paycheck that this payroll tax cut would be benefitting. The people who desperately need a quick fix and extra cash immediately to help boost the economy would not receive a dime through this executive action. Eliminating the payroll tax does not help you if you’ve lost your job and aren’t getting a paycheck.

Implementing a payroll tax cut more than halfway through the year would be incredibly messy. Employers may decide to hold onto the tax they would have paid until they know whether they will have to pay it back when they file their 2020 tax returns next year. As the payroll “holiday” is currently written, they can choose to give the money to their employees, or hold onto it so they can easily pay it back once the pause is lifted. This means that even though the payroll tax cut seems like it is helping the employee, most will never see the employee’s 6.2% share as an increase of pay in their paychecks through this four-month period. And they may have to pay it back when they file their 2020 returns.

While this is currently just a four-month “holiday,” Trump has said that if he were to get reelected, he would “extend and terminate” making this tax cut permanent. That’s a big problem since the payroll tax funds social security and the Social Security Administration Board of Trustees projects program cost to rise by 2035 so that taxes will be enough to pay for only 75% of scheduled benefits. Extending the payroll tax holiday or terminating the tax would in turn terminate Social Security. That’s a great injustice to everyone who has been paying into social security their entire careers and to the millions of seniors who rely on their monthly Social Security check to survive. Your own money that you worked for and have been promised for your retirement years would completely disappear.

While the president argues that the government would find the funds elsewhere to keep social security afloat, he hasn’t said where. The Trump campaign says it would use general revenue to make up for the losses from the payroll tax cut, but at what cost? Continuing to underfund our infrastructure that is so badly in need of repair? Eliminating aid to schools? Or will he just keep borrowing and plunge our nation into even greater debt that our children and grandchildren will have to pay? Not to mention that what the president proposes is not within his power and would take an act of Congress.

Finally, it is highly unlikely that eliminating the payroll tax would stimulate enough economic growth to offset the loss of the payroll tax. This tax cut will negatively impact thousands of people in New Jersey alone, and without social security after retirement, some people will not be able to survive without their promised savings. Simply put, while the payroll tax cut may sound like a good idea on the surface, in reality, we cannot afford to have social security underfunded. It’s what the people of New Jersey have been promised, and it is what we should intend to keep.

President Franklin Roosevelt said he designed Social Security to be funded by a payroll tax so “no damn politician can ever scrap my social security program.” We owe it to every American to honor that vision.

Assemblyman Eric Houghtaling and Assemblywoman Joann Downey represent the 11th Legislative District, which includes parts of Monmouth County.

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published this page in News and Politics 2020-09-26 03:46:14 -0700