Terminating Payroll Tax

With an election approaching Trump is dangling this in front of us:

Two problems I see:

First, logistics:

In early August Trump issued an executive order which defers the 6.2% tax that employees pay into Social Security starting September 1. People who earn less than $4,000 per biweekly pay period ($104,000 annually) and whose employers opt into the deferral will not have to pay that tax until December 31. However, the taxes are only deferred, not cut entirely. Employees will face double withholdings from January through April  to even things out, meaning smaller paychecks during that time. The executive order also puts the onus on companies, not individual employees to take action; companies have to opt into the deferral and are responsible for making sure that the deferred amount is paid to the Internal Revenue Service by April 30, 2021.

How employers would handle payments for anyone who terminates employment as of January 1, 2021 is one of several issues not thought out but for me, who will be preparing my company’s third quarter taxes tomorrow, the issue would be, if I had opted in, whether it was acceptable to mark up form 941:

I suspect not too many companies opted in but, assuming Trump wins, that will change dramatically (assuming he keeps his promise which is slightly less likely than Trump winning) which brings us to the second problem:

An estimate from Social Security Chief Actuary Stephen Goss found that a permanent payroll tax cut could deplete the program’s trust funds by mid-2023. Funding for disability benefits could run out as soon as mid-2021.

If we assume 150 million people employed getting an average salary of $50,000 that comes to $465 billion dollars that would not be going into the Social Security “trust fund”. Per Wikipedia:

In 2017, Social Security expenditures totaled $806.7 billion for OASDI and $145.8 billion for DI.

It is beginning to look like a Biden win means a public and multiemployer pension bailout while a Trump win means a Social Security bailout.

17 responses to this post.

  1. Posted by Tough Love on September 25, 2020 at 6:43 pm

    John, You omitted a VERY important (and extremely obnoxious) part of what Trump stated……….. that if he is re-elected he would likely make that payroll (meaning SS) tax cut permanent.

    It’s that offering a BRIBE ?



    • That was in the video and it’s a great idea. Payroll taxes are an enormous burden on the lower paid for what is essentially a transfer mechanism.

      The plan was obviously to have a bunch of workers see a larger paycheck and connect that with a vote for Trump. Not sure if that’s going to work if a lot of employers don’t sign on. And I presume there is not much participation since otherwise the pay-as-you-go system goes broke immediately.


    • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on September 27, 2020 at 2:10 pm

      It’s that offering a BRIBE ?
      Man TL you TDS is off the charts … Bribe?? Please. Cannot wait until November 3, 2020, to see your head explode 🙂


      • Posted by Tough Love on September 27, 2020 at 2:44 pm

        I’ll remind you of this comment WHEN (not IF) Biden wins.


        • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on September 27, 2020 at 5:23 pm

          Wakey Wakey, Dream Time is OVER!

          If you want to see a REAL slaughter, set your DVR for 6-8 PM Tuesday night, and watch Trump destroy Sleepy Joe 🙂


          • Posted by Tough Love on September 27, 2020 at 7:03 pm

            I will be watching that.

            Too bad the commentator can’t fact-check LIVE, AS IT HAPPENS.

            Why the Public put up with Trump’s incessant lying is bewildering.


  2. Posted by Tough Love on September 25, 2020 at 10:29 pm

    The president also announced that 33 million Medicare beneficiaries will in the coming weeks be receiving a card for $200 to help pay for prescription drugs.


    What happened to only CONGRESS having the authority to authorize expenditures …………. especially since it’s clearly trying to BUY Senior’s votes (i.e. a BRIBE).?

    Can he actually DO THIS ? How is this legal ?


  3. “Pelosi to Test How Badly Trump Wants His Signature on a Second Round of Stimulus Checks”

    The Intelligencer, Sept 24, 2020


  4. It seems to me that no matter who wins, everything will need a bail out, pensions, SS, Medicare, etc

    Just MHO


    • Posted by Rex the Wonder Dog! 🐶🐶🐶🦴🦴🦴 on September 27, 2020 at 10:21 pm

      It seems to me that no matter who wins, everything will need a bail out, pensions, SS, Medicare, etc
      Trump is running humongous budget deficits, which is killing us, but at least we have serious GDP growth and and he is taming the massive trade deficit with China. Sleepy Joe would run the same budget deficits with NO GDP growth, AND bailout the 1%er privileged public sector class while screwing over the poor, middle class and everyone else ….And that would be 100 times worse 😦


  5. Posted by Eric on September 26, 2020 at 7:59 am

    Whoever wins will receive a poisoned chalice.


  6. Posted by geo8rge on September 26, 2020 at 9:53 am

    Payroll tax rate history, note the large Reagan Era Tax increase 1984.


    I can’t figure out who was responsible. Apparently small payroll tax increases were already planned and Reagan just accelerated them.




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