Private businesses have largely decided to reject Donald Trump's offer to suspend payroll taxes for their employees, mostly because it's just a temporary suspension that those employees would have to pay back next year. But Trump is so fixated on the payroll tax cut—which no one else, even Sen. Mitch McConnell, has embraced—that he's forcing it on government employees. With their next paycheck, about 1.3 million people are going to see the temporary boost in pay … which they'll need to save to repay next year.
Democratic Rep. Don Beyer, whose Northern Virginia district includes a large share of federal employees, blasted the move, saying Trump was treating those employees like "guinea pigs." The deferral, he said, "would not really put money in workers’ pockets, it would simply set up the members of the federal workforce who can least afford it for a big tax bill that many will not expect." Trump's directive instructs the government to put the 6.2% of pay that employers withhold for Social Security and Medicare into paychecks for the rest of the year. Then in January, employers are required to recoup that money, probably by doubling the withholding until it's all paid back, which would be by May. If it's not paid back by May 1, the employees are liable for interest and penalties on any amount still owed.
We're also talking about millions of dollars not going to Social Security for the next three months. Trump has promised that he's going to "terminate" the payroll tax. That would also "terminate" Social Security, the chief actuary for the program said. It would deplete the whole Social Security Disability fund next year, and the retirement and survivors’ funds in 2023.
Everett Kelley, the national president of the American Federation of Government Employees, calls Trump's directive a "scam that leaves workers with a substantial tax bill right after the holiday season." It's not clear at this point whether the deferral is optional and agencies can decide not to do it. A spokeswoman at the Office of Management and Budget wouldn't answer that question directly. "The president put forward this action to give relief to all Americans during this pandemic," the spokeswoman, Rachel Semmell, said in a statement, adding that the federal government is "implementing the deferral to give our employees relief as quickly as possible, in line with the presidential memo."
What federal employees would probably much rather see is a White House and Congress working diligently toward solving the economic crisis the coronavirus has created. They'd probably even more urgently want to see them working on a budget for FY2021 that would avoid a government shutdown and keep them on the job for the rest of the year.
