Among the items that President Trump issued an “executive action” about three weeks ago was that for people earning less than around $104.000 per year, their fica taxes were to be postponed until Jan. 1, not cut, merely postponed, although Trump made noises that if he is reelected he will simply eliminate the fica tax entirely, although unclear how he plans to fund Social Security without it.
Anyway, Allan Sloan in the Washington Post reports that this initiative is now just completely dead in the water. It has too many problems, too many opponents, and action on implementing it in the Treasury Department has simply stalled out, almost certainly for good due to all this. Quite aside from people facing potentially huge fica tax bills in January due to four months of postponement, it apparently is very complicated to set this up, and would take many months to do so, involving businesses and the Treasury Dept. having to put in place all kinds of mechanisms to figure out exactly which people would get their taxes postponed and which would not. A real killer is that businesses pretty much across the board have objected to this proposal, with this now official as 30 different such groups have called for the cessation of this effort through the US Chamber of Commerce. This is just going nowhere.
This should be contrasted with the temporary fica tax cut that Obama had in place during 2011-2012. There are two large differences between that and what Trump has so incompetently proposed. One is that Obama had it pass through Congress, not be the result of a presidential directive or memo. The other is that it was completely simple: all Social Security taxes stopped being collected for the period in question, not a system based on treating people differently based on their incomes and also not a postponement. It was a straight cut, if only a temporary one.
Tax cuts eliminate a cost that reduces profits and thus dividends, stock buybacks etc. etc. So Republican politicians prefer these cost cuts go to their donors, the owners of capital assets like corporation stocks and bonds etc. etc. Not a whole lot different than Democrats, btw. The FICA deal by Obama was shared with employees. But that’s a Democrat hangup.
Democrat [sic] hangup?
It was a straight up attempt by the moron in chief to buy votes. I actually doubt that it would have succeeded because everyone but his moronic base would have seen through it and his moronic base is going to vote for him regardless. Still it is nice to see that at least some government and business leaders are willing to call him on his nonsense. Too bad none of them are with the FDA, CDC or DOJ
Apparently Trump has ordered this for federal eimployees, whether they like it or not. So they will not have fica withheld from their paychecks Sept. 16 to end of year, but after that they will have twice as much withheld from their paychecks to make up for it. Somehow I doubt this is going to get him many votes.
(It appears participation in FICA tax deferral is ‘voluntary’ for employers,
and they may be in legal trouble if they do so. Trump, being Federal CEO,opts to do the deferral thing. Go figure!)
IRS Issues Notice 2020-65 Providing Guidance on Employee Social Security Tax Deferral
Late Friday, the IRS released Notice 2020-65 providing guidance to employers regarding the implementation of President Trump’s presidential memorandum issued on August 8, 2020. The memorandum directed the Secretary of the Treasury to defer the withholding, deposit, and payment of employee Social Security taxes for the period from September 1 to December 31, 2020 (see earlier coverage of the presidential memorandum). Shortly after the memorandum was released, Secretary Mnuchin confirmed that the deferral is voluntary and that employers may continue to withhold and deposit employee Social Security taxes in accordance with their normal schedule (see earlier coverage of Sec. Mnuchin’s confirmation that deferral is voluntary).
Although brief, Notice 2020-65 does answer some key questions for employers. The presidential memorandum left unclear which employees would be eligible for the deferral stating that it applied to employees who generally have wages (for purposes of FICA taxes) of less than $4,000 per bi-weekly pay period, or the equivalent amount for pay periods of other lengths (e.g., $2,000 per weekly pay period, $4,333 per semi-monthly pay period). Notice 2020-65 clarifies that the determination of whether an employee is eligible for the deferral of the employee’s share of Social Security taxes must be determined on a payroll-by-payroll period. In other words, if an hourly employee’s wages are below the pay-period threshold for a pay period, the employee’s share of Social Security taxes may be deferred. If in the following pay period, the employee’s wages exceed the threshold, the employee’s share of Social Security taxes must be deposited on time. …
(Shame on me for posting this here.)
You Want Progressive Policies? You Need Progressive Taxes
NY Times – Kitty Richards and Joseph E. Stiglitz – September 3
Foolish federal dithering means states have to step in. Yes, even in the midst of a pandemic.
(Ms. Richards is a fellow at the Roosevelt Institute, where Mr. Stiglitz, a Nobel laureate in economics, is the chief economist.)
As the coronavirus pandemic — and Congress’s undersize response — wreaks havoc throughout the economy, tax receipts are cratering. This means that state and local governments are facing enormous revenue shortfalls at the exact time they are dealing with large additional demands. So far, states and localities have responded by slashing spending and jobs, with 1.5 million public-sector workers laid off by the end of June.
The federal government, which unlike most states does not have to balance its budget every year, could solve the problem tomorrow by providing fiscal relief to states and localities, like the $1 trillion provided by the HEROES Act that passed the House in May.
But regardless of whether Congress acts, states and localities can bolster their local economies and support their residents by raising taxes on those who have not been hard hit by the recession. This is not only the right thing to do from a humanitarian standpoint, it is sound economics.
Spending cuts are enormously harmful to the people who rely on government services and the public workers who lose their jobs. In a recession, cuts also damage the broader economy, causing layoffs to ripple through the community. …
Those who see pay increases when FICA deductions have
disappeared are advised to save the money (if possible)
in case it needs to be ‘repaid’ at some future date.
OTOH, Trump supposedly intends (in his 2nd term)
to terminate FICA deductions permanently, which
presumably means the end of Social Security
as we know it in a couple of years.
On Aug. 8, 2020, U.S. President Donald Trump said he intended to “terminate the tax,” referring to Social Security and Medicare payroll taxes. It’s a step that would — if taken in isolation — remove nearly 90% of funding for Social Security benefits, and thus likely pose a threat to the continued existence of those programs. …