Payroll Tax Delay May Mean Problems For Workers, Employers And Social Security President Trump has directed the Treasury Department to stop collecting payroll taxes this fall in an effort to boost workers' paychecks. But the move is temporary, and could spark headaches in 2021.
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Payroll Tax Delay To Boost Take-Home Pay, But Don't Spend It Yet

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Payroll Tax Delay To Boost Take-Home Pay, But Don't Spend It Yet

Payroll Tax Delay To Boost Take-Home Pay, But Don't Spend It Yet

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NOEL KING, HOST:

President Trump wants to pause workers' payroll taxes. That would leave more money in people's paychecks. And it would inject about $100 billion into the economy. But the move is only temporary. And that could cause problems later for workers, employers and the Social Security system. NPR's Scott Horsley explains why.

SCOTT HORSLEY, BYLINE: President Trump ordered the Treasury Department to stop collecting the 6.2% payroll tax from workers making up to about $100,000 a year. The order is supposed to take effect next month.

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PRESIDENT DONALD TRUMP: This will mean bigger paychecks for working families as we race to produce a vaccine.

HORSLEY: So far, though, the president's move has sparked a lot of confusion. Critics say this particular relief is misguided because it benefits only people who are lucky enough to still have a job. And while the president has the legal authority to delay tax collection, that relief is only temporary. Maya MacGuineas, who heads the Committee for a Responsible Federal Budget, says, as it stands, workers will have to repay the taxes next year.

MAYA MACGUINEAS: So what good does that do people? If they just get a temporary payroll tax cut and have to put that somewhere to save it to repay the money in a balloon payment a couple months from now, that's really done very little to improve the economy.

HORSLEY: Trump insists his goal, if he's reelected, is to cut payroll taxes for good.

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TRUMP: If I'm victorious on November 3, I plan to forgive these taxes and make permanent cuts to the payroll tax. I'm going to make them all permanent.

HORSLEY: But only Congress has the power to permanently cut taxes. And there's no guarantee lawmakers will go along with Trump's wishes. If they did, MacGuineas says, that would deal a severe blow to Social Security, which the payroll taxes pay for.

MACGUINEAS: Social Security is already facing immense pressures in terms of the finances. Getting rid of the revenue source that funds the program would make the finances of it much, much worse.

HORSLEY: The payroll tax suspension seemed to have little support outside the White House and a small circle of presidential advisers. It never gained much traction in Congress. And the Chamber of Commerce said it's not something the business community was clamoring for. So who did want this?

STEPHEN MOORE: The people who love the payroll tax cut are the American people.

HORSLEY: That's conservative pundit Stephen Moore, an adviser to Trump's campaign who was briefly floated as a nominee for the Federal Reserve Board. Moore, who co-founded the anti-tax Club for Growth, has been one of the most dogged advocates for payroll tax relief.

MOORE: Virtually all Americans who are working are going to see a nice boost in their paycheck. So that puts money in the economy and incentivize people to work. And I think that's a very positive fact.

HORSLEY: Saturday's surprise announcement has employers scrambling. Pete Isberg, who's a vice president with the payroll processing firm ADP, says companies need guidance from the IRS on exactly who's eligible to have their taxes suspended and how to keep track so those taxes can eventually be repaid.

PETE ISBERG: It's going to be a mixed bag of employers, some of which will be able to do this on September 1. Some will be able to do it in October or November. And some may just never do it.

HORSLEY: Isberg says employers also want some reassurance that they won't be on the hook for workers' unpaid taxes if Congress doesn't forgive the bill. Employers also have to figure out how to explain to their workers why take-home pay is temporarily going up in September and why they might want to be careful about what they do with the extra money.

Scott Horsley, NPR News, Washington.

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