IRS Called on for Taxpayer COVID-19 Relief

IRS Called on for Taxpayer COVID-19 Relief

(RightWing.org) – Economists all over the world fear what the coronavirus epidemic could do to economies already struggling against recessionary pressures. President Trump is trying to give the US a defense against that – and it could also be good news for ordinary working Americans.

Highlights

On Monday, President Trump proposed a temporary suspension of payroll taxes for both workers and employers as an emergency measure to make the economy more resilient.

  • Payroll tax is mandated by the Federal Insurance Contributions Act (FICA), and it’s used to fund Social Security and Medicare. The current rate is 15.3% — 12.4% for Social Security and 2.9% for Medicare — evenly split between the employer and employee.
  • Economists see payroll tax as regressive, because most of it’s only charged on income up to $137,700. There’s also no lower limit to the income, so it hits low and middle-income workers proportionately harder.
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  • Now President Trump is looking at cutting the tax rate to zero for the duration of the coronavirus outbreak. This would leave workers with more cash in their pockets to spend on goods and services, giving the US economy a major boost.
  • At the same time, businesses would have extra money available to invest. This would help them meet the increased demand, and also give them a chance to research and modernize.
  • The hope is that, between them, these benefits would balance out any slowdown caused by the virus. Both COVID-19 itself and government measures to slow its spread can disrupt the economy, keeping people from work and causing problems for businesses.
  • The president first suggested a payroll tax holiday at a press conference on Monday. It’s now known that he raised it again the next day, at a working lunch with Republican senators.
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  • Administration sources are also saying that, in the long run, Trump would like to get rid of payroll tax for good. Instead, he wants to fund Social Security, Medicare and unemployment insurance from general government revenues.
  • The proposal received a mixed reaction from Republicans. Some are worried that it would increase the federal deficit, which is already a major worry for fiscal conservatives.
  • However, others think it’s a fast and effective way of feeding the economy some high-test fuel. Other ways to inject cash could take months to put into action. Changing a tax rate from 15.3% to zero is a quick fix that can be carried out almost instantly.

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