WASHINGTON (NEXSTAR) – While sidestepping Congress, President Trump is trying to make good on his promise of a payroll tax cut to help American workers struggling through the pandemic.
But don’t expect it to hit your paycheck yet.
Questions still remain about who will be responsible for collecting the deferred tax, how and when it will need to be paid off, and if corporate America will sign on to the plan.
“We just don’t know yet whether this will be good or not because the devil is in the details, and we don’t have any of those,” said Todd McCracken, the president of the National Small Business Association.
The president’s executive order defers collecting the taxes that fund Social Security and Medicare until Jan. 1. McCracken wants to know if it’s mandatory for employers, how workers will pay what’s owed at that later date, and what happens if their paychecks fluctuate.
McCracken hopes businesses will be able to decide whether to participate and defer their half of the payroll tax as well.
“There’s all kinds of questions about how this will actually work, and I’m not sure Treasury is going to be able to answer all of these questions in time for a quick implementation,” McCracken said.
President Trump’s order gives the Treasury Department until Sept. 1 to release its guidance.
Joe Bishop-Henchman with the National Taxpayers Union Foundation said businesses also don’t know if the IRS will waive penalties for not collecting and remitting the tax.
“It’s a big disincentive to risk all of that,” Bishop-Henchman said.
Under the order, Bishop-Henchman said there’s more of an incentive for employers to hold on to the funds and wait to see if President Trump follows through on another promise.
“With the understanding that after the election, on the assumption that it would be victorious for an administration that’s done a great job, we will be ending that tax,” Trump reiterated during a press briefing at the White House Monday.
However, the president can’t sidestep lawmakers here. He would need congressional approval to make the payroll tax change permanent.
“Cutting it off completely, of course, would be a very dramatic change to the budget,” Bishop-Henchman said. “Maybe not a bad idea. Certainly, there is some merit to reducing taxes and changing the makeup of our tax system. But doing it on a temporary basis under a cloud of legal uncertainty in a way that leaves businesses unclear about what they’re supposed to do, that’s not really the best way to proceed for taxpayers.”
President Trump signed three other executive orders over the weekend as coronavirus relief negotiations with Congress stalled. They provide an additional $400 weekly in unemployment benefits to replace the $600 that recently expired, protect some renters from eviction and suspend some student loan payments.
This is a developing story. Stay with News 2 and WKRN.com for updates.