On Saturday Trump signed four executive orders intending to help people struggling financially because of the coronavirus.
I'm old enough to remember the Obama era when presidential executive orders were roundly denounced by conservatives as being unconstitutional and an abuse of executive power. (US Constitution, Article I, Section 8, Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts...) I guess now that Trump is president, executive orders have been embraced as great stuff.
The one I want to focus on is the FICA tax deferral starting September 1st and ending December 31, 2020. Notice I did not say FICA tax suspension, tax holiday, or FICA tax elimination. The word is deferral. That means the FICA tax must be repaid.
Here is the exact language of the text:
Sec. 2. Deferring Certain Payroll Tax Obligations. The Secretary of the Treasury is hereby directed to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020, through December 31, 2020
Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster | The White House
This means that the employee portion of FICA tax of 6.2% that is withheld from your paycheck does not need to be withheld. I say "does not need to be withheld" because it's not clear whether employers are required to suspend the withholding or whether it is a voluntary action. (The 1.45% Medicare tax must and will continue to be withheld.) Since it's ambiguous, it appears the withholding of the employee portion of the FICA tax is a voluntary action by employers. If your employer opts to not withhold the FICA tax, you will see a 6.2% increase in your take home pay, so long as you don't gross more than $4,000 every two weeks, or $104,000 per year.
Not only that, but any money that does not flow into the Social Security Administration because of this deferral needs to be replaced. OK, what is Trump's plan to replace the money?
Sec. 4. Tax Forgiveness. The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.
Looks like the plan is to think about how it's going to be repaid down the road. Maybe each worker will end up with a tax bill for the deferred FICA taxes. Maybe Congress will fund the FICA amount that was deferred from paychecks using money from the general fund. Maybe Trump will use his pen and simply "forgive" the amounts owed.
Now here's the scary part--Trump says he intends the FICA tax collection of the employee portion to be "permanently eliminated". That's right. He wants to end the collection of FICA from employee's paychecks FOREVER.
“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said.
Trump's payroll tax cut would 'terminate' Social Security, critics say
Sounds like Trump intends to eliminate a payroll tax with the wave of his hand!
So far, the only Republicans I know of that have objected to Trump's action on FICA withholding is Ben Sasse and Rand Paul. The usually stalwart Constitutional scholar Ted Cruz has been silent.
I'm old enough to remember the Obama era when presidential executive orders were roundly denounced by conservatives as being unconstitutional and an abuse of executive power. (US Constitution, Article I, Section 8, Clause 1: The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts...) I guess now that Trump is president, executive orders have been embraced as great stuff.
The one I want to focus on is the FICA tax deferral starting September 1st and ending December 31, 2020. Notice I did not say FICA tax suspension, tax holiday, or FICA tax elimination. The word is deferral. That means the FICA tax must be repaid.
Here is the exact language of the text:
Sec. 2. Deferring Certain Payroll Tax Obligations. The Secretary of the Treasury is hereby directed to use his authority pursuant to 26 U.S.C. 7508A to defer the withholding, deposit, and payment of the tax imposed by 26 U.S.C. 3101(a), and so much of the tax imposed by 26 U.S.C. 3201 as is attributable to the rate in effect under 26 U.S.C. 3101(a), on wages or compensation, as applicable, paid during the period of September 1, 2020, through December 31, 2020
Memorandum on Deferring Payroll Tax Obligations in Light of the Ongoing COVID-19 Disaster | The White House
This means that the employee portion of FICA tax of 6.2% that is withheld from your paycheck does not need to be withheld. I say "does not need to be withheld" because it's not clear whether employers are required to suspend the withholding or whether it is a voluntary action. (The 1.45% Medicare tax must and will continue to be withheld.) Since it's ambiguous, it appears the withholding of the employee portion of the FICA tax is a voluntary action by employers. If your employer opts to not withhold the FICA tax, you will see a 6.2% increase in your take home pay, so long as you don't gross more than $4,000 every two weeks, or $104,000 per year.
Not only that, but any money that does not flow into the Social Security Administration because of this deferral needs to be replaced. OK, what is Trump's plan to replace the money?
Sec. 4. Tax Forgiveness. The Secretary of the Treasury shall explore avenues, including legislation, to eliminate the obligation to pay the taxes deferred pursuant to the implementation of this memorandum.
Looks like the plan is to think about how it's going to be repaid down the road. Maybe each worker will end up with a tax bill for the deferred FICA taxes. Maybe Congress will fund the FICA amount that was deferred from paychecks using money from the general fund. Maybe Trump will use his pen and simply "forgive" the amounts owed.
Now here's the scary part--Trump says he intends the FICA tax collection of the employee portion to be "permanently eliminated". That's right. He wants to end the collection of FICA from employee's paychecks FOREVER.
“If I’m victorious on November 3rd, I plan to forgive these taxes and make permanent cuts to the payroll tax,” Trump said.
Trump's payroll tax cut would 'terminate' Social Security, critics say
Sounds like Trump intends to eliminate a payroll tax with the wave of his hand!
So far, the only Republicans I know of that have objected to Trump's action on FICA withholding is Ben Sasse and Rand Paul. The usually stalwart Constitutional scholar Ted Cruz has been silent.
