House Ways and Means Committee ranking member Kevin Brady, R-Texas, introduced legislation late Friday that would “forgive” Social Security taxes deferred under President Donald Trump’s executive order.
Brady’s bill, the Support for Workers, Families and Social Security Act, would create a temporary payroll tax holiday from Sept. 1 through Dec. 31, 2020, for all workers, Brady said in a statement.
The bill decreases for four months the Old Age, Survivors, and Disability Insurance tax rate by 6.2% — the full amount that workers pay — and decreases the annual Self-Employment Contributions Act tax rate by approximately 2.07%.
The Social Security trust fund “would be held harmless through transfers from the general fund equal to the reductions in revenues,” according to the Joint Committee on Taxation‘s analysis of Brady’s bill.
“I call on Congress, including Democrats who forgave these payroll taxes twice for President Obama, to act now to help our essential workers keep more of what they work so hard to earn,” Brady said. “We’re not through this pandemic yet, and this will help local economies, create certainty for businesses, and safeguard Social Security.”
President Barack Obama signed two separate bills that cut payroll taxes by 2% — the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 and the Middle Class Tax Relief and Job Creation Act of 2012.
The IRS issued guidance on Aug. 31 for employers that choose to give their employees a temporary break from the Social Security payroll tax.
Senate Democrats, however, are attempting to reverse Trump’s payroll tax deferral order by pressing the Government Accountability Office to determine whether the recent Treasury Department and IRS guidance implementing the order is a “rule” under the Congressional Review Act.
The Act allows Congress to undo rules issued by federal agencies via a joint resolution of disapproval in the Senate.
“President Trump’s plan at best gives no help to workers and at worst saddles lower to middle-income Americans with a tax bill the Treasury Department has said will have to be repaid by April next year,” Senate Minority Leader Chuck Schumer, D-N.Y. and Sen. Ron Wyden, D-Ore., said Sept. 1 in a letter to the office.
Nancy Altman, president of Social Security Works, a group that supports expanding Social Security, told ThinkAdvisor in a Monday email message that Trump’s “unilateral, unprecedented action and promise to defund Social Security shows what a serious threat he is to all of our economic security. … Brady is seeking to stop the bleeding from this self-inflicted wound by transferring over $100 billion in borrowed funds to replace Social Security’s dedicated revenue. In contrast, Democrats are trying to force a vote to block Trump’s action.”
Brady’s bill would remove the obligation to pay those taxes later, “but we’ll see how much support he gets even from other Republicans,” Altman added.
“Instead of wasting $100 billion on a poorly targeted and destructive cut to Social Security’s dedicated revenue, Democrats support the HEROES Act, which will help not just workers but the unemployed as well,” she said.
Under Trump’s presidential executive order issued Aug. 8, employers can defer the 6.2% tax for employees whose taxable wages are less than $4,000 during a bi-weekly pay period — equivalent to roughly $104,000 annually — from Sept. 1 through Dec. 31.
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