Democrats Have A Plan To Overturn Trump’s Payroll Tax Deferral Program

TOPLINE

According to a new report from the Wall Street Journal, Senate Democrats have begun a process that could force a Congressional vote to overturn President Trump’s new Social Security tax deferral program—the maneuver, which is not likely to succeed because it would require significant Republican buy-in, still would send a message to voters that Democrats are intent on protecting funding for the retirement program. 

KEY FACTS

According to the Journal, Democrats want to use the Congressional Review Act—a law that lets Congress overturn regulations promulgated by the executive branch—to roll back a policy that Democrats say is misleading, geared towards Trump’s reelection campaign, and unlikely to provide real support to the economy.  

Democrats are also concerned that the policy poses a risk to the already precarious finances of Social Security. 

Under the procedures of the CRA, the Democrats would be able to force a vote on overturning the payroll tax deferment even though they don’t have a majority in the Senate or control its agenda.

If the vote succeeded, they would then need two-thirds of the entire Senate and House of Representatives to override a presidential veto of the resolution; a veto is almost inevitable if lawmakers vote to block one of President Donald Trump’s signature policies. 

Because so many Republicans would need to vote against the policy for Democrats’ bid to be successful, the vote itself—let alone a veto override—isn’t likely to be successful. 

Still, Democrats are moving forward with the first step of the process, the Journal reported, by requesting a review from the Government Accountability Office to determine whether the payroll tax deferral action would qualify for a vote under the CRA. 

Key background

Under the new program, created by Trump via executive action at the beginning of August, employers can stop withholding the 6.2% Social Security tax employees pay, so long as the worker earns less than $4,000 in a biweekly pay period (or less than $104,000 on an annualized basis). The deferment period will last from September 1 through the end of the year, but come January, those deferred taxes will have to be collected and paid back to the federal government before the end of April. Those who are unemployed do not receive any benefit from the program. Employers must continue to pay the 6.2% they contribute to Social Security tax and it appears, from guidance the IRS issued last Friday, that the self-employed won’t be allowed to defer any of the Social Security tax they pay. 

What we don’t know

The IRS released guidance about the new tax program just four days before it went into effect. As a result, many companies have not opted in because of uncertainties about how the process will work and the massive administrative burden that would be involved. According to Pete Isberg, VP of Government Affairs for payroll processor ADP, employers are “entirely on the hook and exclusively on the hook” for the delayed taxes next year. What isn’t clear is whether, or how, employers could recoup the money for seasonal workers or employees that leave their jobs before the end of the repayment period. 

Crucial quote

“There is no intention of having this cost one penny out of the Social Security Trust fund,”  Treasury Secretary Steven Mnuchin (who is the head trustee of the Social Security trust fund) insisted during a Tuesday hearing before the House. But if President Trump is able to convince Congress to turn the temporary payroll tax deferral into a permanent payroll tax cut, as he has repeatedly suggested he wants to do if reelected in November, that assertion may not hold true.

Big number

3 years. If President Trump eliminated the payroll tax without finding another source of funding to replace it, that’s how long it would take for Social Security benefits to run out, according to an estimate from the Social Security Administration’s chief actuary. (Trump has said he would have Social Security continue with money from the government’s general fund.) 

Further reading

Democrats Aim for Long-Shot Vote to Overturn Trump Payroll-Tax Deferral (Wall Street Journal)

Questions Remain After IRS Rolls Out Guidance On Payroll Tax Deferral (Forbes)

IRS Payroll Tax Deferral Starts Today; Will It Defund Social Security? (Forbes)

IRS And Treasury Issue Guidance On Trump’s Payroll Tax Deferral (Forbe

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