Trump’s Payroll Tax Cut Is the Wrong Prescription for COVID-19
[via Economic Opportunity Institute] President Trump, grappling with a brewing economic crisis precipitated by his failure to manage the federal response to the COVID-19 pandemic, thinks he’s found the answer: a payroll tax cut. It’s the wrong prescription for our economy.
As part of a broader package of emergency response, Congress should instead expand Social Security, which – exactly as intended – delivers crucial economic benefits directly to individuals, communities, and small businesses in cities and rural areas alike, day-in and day-out, even in the midst of a crisis like COVID-19.
There are many drawbacks to cutting payroll taxes right now – here are three of the biggest:
- It won’t help workers who have lost jobs – because they aren’t getting paid – and it won’t benefit the elderly (who are most at risk of COVID-19), because most of them aren’t working.
- For those who are working, it’s of little benefit. For example, half of Washington workers would see a benefit of less than $92 per month – hardly enough to make a significant difference.
- It would reduce revenue going to Social Security, which is entirely financed by payroll taxes. If backfilled with general tax revenue, Social Security’s opponents will push for benefit cuts, if recent history is any guide.
In 2018, Social Security benefits generated an estimated $42.3 billion in economic activity, more than 268,000 jobs and nearly $2.2 billion in state and local tax revenue in Washington alone. In December of that year, Social Security delivered over $1.9 billion in benefits to our local economies – from populous King County ($450 million to 295,000 people) to rural Garfield County ($889,000 to 665 people).
Rep. John Larson’s Social Security 2100 Act is ready and waiting in Congress, with hundreds of co-sponsors already signed on. It would permanently increase the ongoing stimulus that Social Security provides by putting more money in the wallets of millions of retirees, disabled workers, and survivors who struggle now with rapidly rising health care and housing costs – financed largely by applying the existing payroll tax to wages above $400,000.
Other measures under consideration now in Congress would also make a difference, like: enacting federal paid sick time and paid family leave laws; increasing food stamps and other food supports; bolstering public health care systems; infusing money and increasing coverage of state unemployment insurance programs; and providing grants for small businesses most impacted by coronavirus. Congress should also pass those immediately, but reject the president’s payroll tax cut idea.