President Donald Trump’s proposal for a payroll-tax cut to juice the economy amid the threat from the coronavirus is running into pushback from Democratic lawmakers.
Ron Wyden, the senior Democrat on the Senate Finance Committee, said the proposal Trump floated to Republican lawmakers on Tuesday would be a “huge mistake.”
“What they want to do is hit Social Security like a wrecking ball with a massive tax cut for the country’s biggest corporations,” he said at a news conference. “We are going to oppose this with everything we have.”
Sen. Sherrod Brown, the senior Democrat on the Banking Committee, said he supported “helping those people that are getting hurt. It doesn’t mean more interest rate cuts, it doesn’t mean more tax cuts that favor the wealthy, which Trump always does.”
Trump told Republicans that he wants the payroll tax rate to drop from 14.2% to zero through the end of the year in the hope that the extra money in workers’ paychecks will spur consumer spending, a bedrock of economic growth. “Under the president’s timeline, he would ensure that the tax is zeroed out throughout his re-election campaign,” NBC News noted.
The tax generated $1.17 trillion, or 35.2% of all federal revenues, in fiscal 2018, with most of the revenue going to fund Social Security, Medicare, and other social insurance benefits.
But economists say that slashing the tax now would do almost nothing to help low-income Americans.
“A one-year payroll tax cut of 2% of income would provide up to a $5,508 tax cut to a high-income couple, only $500 to a single parent getting by on $25,000 a year, and nothing for a worker placed on leave without pay,” Jason Furman, a top economist in the Obama administration, wrote on Twitter.
House Democrats said they plan to pass a stimulus bill as soon as Thursday that includes enhanced unemployment benefits, paid sick leave, and a boost in the availability of food stamps. Majority Leader Steny Hoyer, Maryland Democrat, said a big payroll tax cut was a “non-starter.”