Trump Pushes Payroll Tax Cut Panned by Economists

Trump Pushes Payroll Tax Cut Panned by Economists

Reuters/Joshua Roberts

As the Senate returns to the Capitol this week, the obstacles to the next round of emergency coronavirus relief legislation seem to be mounting.

Trump insists on a payroll tax cut: President Trump said on Sunday that he won’t support any stimulus package unless it includes a payroll tax cut. “We’re not doing anything unless we get a payroll tax cut,” Trump said during a Fox News virtual town hall.

Trump has been pushing the idea of temporarily suspending both the employer and employee payroll taxes, meaning the 12.4% tax to fund Social Security and the 2.9% tax to fund Medicare. But lawmakers — both Republicans and Democrats — largely dismissed the idea when Trump floated it in March.

Critics have routinely pointed out that a payroll tax cut won’t help those people most in need of a financial lifeline: those who are no longer on payrolls. “The 30 million people who’ve lost their jobs wouldn’t get a direct benefit, and economists say a payroll tax cut likely isn’t enough by itself to boost consumer spending -- a prime driver of the economy -- and spur companies to begin rehiring,” Bloomberg’s Laura Davison reports. And advocates on the left warn that a payroll tax cut would undermine Social Security and Medicare by cutting their dedicated funding. A full elimination of payroill taxes from now through the end of the year would cost about $650 billion, Marc Goldwein of the Committee for a Responsible Federal Budget told Bloomberg.

Infrastructure: Trump also said Sunday that “we will be doing infrastructure,” adding that he and Democrats agree that it’s important. But Senate Majority Leader Mitch McConnell has said that infrastructure won’t be part of the next coronavirus bill, calling it “unrelated” to the pandemic. “We need to keep the White House in the box” on infrastructure, McConnell told Republican Senators on a conference call last week, adding that “Democrats and the White House both need to get the message," according to Axios.

Trump also wants a pause: The president, top administration officials and leading GOP lawmakers have all indicated that they’re in no rush to push through additional coronavirus relief. “I think we want to take a little bit of a pause,” Trump told reporters last Thursday. White House economic adviser Larry Kudlow echoed those comments on Sunday.

The bottom line: Republicans are still insisting on coronavirus liability protections for businesses, which McConnell last week called a “red line going forward on this bill.” Democrats continue to push for more aid to state and local governments. The two sides remain very far apart on those issues. So as we told you last week, any additional coronavirus legislation is likely still weeks away … and there’s little to suggest that the timeframe will speed up.