Over the weekend, Trump signed executive orders to provide some COVID-19 financial relief after Congress was unable to agree on a package before leaving on a month-long vacation. The order addressed last month’s expiration of a $600 a week federal unemployment bonus, as well as student loan relief and help for renters.
Regarding payroll taxes, Trump said people would be getting a little more money thanks to the deferral of payroll taxes from employees through the end of the year.
“This modest, targeted action will put money directly in the pockets of American workers and generate additional incentives for work and employment, right when the money is needed most,” he said.
Essentially a loan
Under the order, which experts have described as “vague,” employees’ obligation to pay a 6.2 percent Social Security tax on each paycheck would be deferred -- not waived. The order applies to people who “generally” make less than $4,000 every two weeks.
Urban-Brookings Tax Policy Center senior fellow Janet Holtzblatt told CNBC Make It that the deferral is essentially a “payroll tax loan.”
“It’s a loan, and if people understand it, they would know that they or their employer would have to repay it eventually,” Holzblatt told CNBC.
Questions remain
Garrett Watson, senior policy analyst at the Tax Foundation, added that it’s “unclear” whether workers will have to rectify the deferral payment on tax form 1040 next year. He said employees may not even see the extra money added to their paychecks.
“It’s actually not clear that firms would be required to necessarily pass along the deferred savings to employees,” Watson says. “It’s very possible that firms would be able to take the deferred savings and withhold from employees.”
Stephen Stanley, chief economist at Amherst Pierpont, agreed that businesses may not be inclined to give the extra money to workers in light of the circumstances.
“It is highly questionable whether firms would actually pass the money along to their workers, because it is the businesses that are on the hook for the taxes,” Stanley told MarketWatch.