The wanna-be dictator is at it again. Trump is signing an executive order that will “suspend” payroll taxes. Trump has tried this move before, and when someone like Trump wants something so badly, we must examine his motivation.
According to New York Times, most economists, including conservative economists, do not believe payroll tax cuts are the best way to revive the economy. Economists estimate it will cost the government approximately $400 billion in lost tax revenue and will not induce hiring. Even Trump’s Republican colleagues disagree with the idea. Chuck Grassley told reporters: “I think [a direct payment is] going to do more economic good than if we dribble out $30 every paycheck.” Really.
The worst aspect of a payroll tax cut is eliminating funding to Medicare. NYT reports that while taxes on earnings under $137,700 go toward Social Security, all earnings are taxed as funding for Medicare. Under Trump’s plan, that revenue would be lost, and you best bet Trump has no plan to reimburse either fund. Indeed, Trump and head henchman Mitch McConnell frequently refer to these programs as “entitlements,” indicating that the government is giving us something when the truth is, we are paying into those funds. The only way the funds can keep going is if they are replenished through payroll deductions. This is not a feasible plan for shoring up people hurting from coronavirus. Most who are hurting are unemployed and are not contributing to payroll taxes, so this idea does not help them.
The Labor Department’s latest statistics show a total of 1.8 million jobs gained in July; however, Marketplace reported that over 25 million Americans are unemployed, including 1.2 million recently unemployed. When looking at these numbers, the economists are correct that eliminating payroll taxes will do absolutely nothing toward helping the people with little or no income. Forbes examined these numbers further.
The self-employed and businesses will benefit most from a payroll tax cut. 1099 employees pay a greater tax liability than W-2 employees, so a tax cut for those workers would be a huge windfall. “Front-line” workers would see no benefit from a payroll tax cut whatsoever unless they make at least $15 per hour. Workers making less will likely see no change. The biggest losers of a payroll tax cut? Social Security, Medicare, and those who rely on them. Social Security is and has for years been in trouble. The “baby boomers” created a strain because of their numbers, and good-paying jobs for the younger generation seem to continue to be “few and far between.” We need to fix this system, not cripple it.
Donald Trump is once again proving that he has no clue how things work in the real world. He has never had to work for a living, so he does not understand the ramifications of his poorly laid plans. His “band-aid on a bullet wound” approach will only make things worse. He needs to allow Congress to hammer out an agreement and go back to what he does best: nothing.
Shirley is a former entertainment writer and has worked in the legal field for over 25 years