Trump's payroll tax deferral is confusing, maybe unworkable, top U.S. business group warns

President Trump has been notably vague about his plans for a potential second term, but he has recently proffered one idea: tax cuts. Specifically, taxes on capital gains, income taxes, and the payroll taxes used to fund Social Security and Medicare. Trump signed an executive order Sunday directing the Treasury Department to defer payroll taxes from Sept. 1 until the end of the year, leaving workers to pay the money back later.

The U.S. Chamber of Commerce, generally a Trump ally on tax cuts, has some serious concerns.

Trump has pitched the payroll tax deferral as a boost to the economy before the November election, but the Chamber asked Treasury Secretary Steven Mnuchin in a letter Wednesday if it would be optional, whether businesses will be liable for repaying the deferred taxes, and how the White House expects the deferred withholdings to help the economy. Trump's order is "surrounded by uncertainty as to its application and implementation" and "only exacerbates the challenges" companies face, the Chamber said. "As American employers, workers, and families work to navigate the COVID-19 crisis they need clarity not more confusion," the business group added in a statement.

Subscribe to The Week

Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

SUBSCRIBE & SAVE

Sign up for The Week's Free Newsletters

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.

Sign up

Trump touted his executive order in a news conference Wednesday evening, saying he would make the payroll tax holiday permanent if re-elected — something that would require an act of Congress, where there is little appetite for the idea in either party. Asked how he planned to finance Social Security and Medicare without the payroll tax, Trump suggested "we're taking it out of the general fund" and then claimed it wouldn't further blow up the ballooning budget deficit because "we're going to have tremendous growth."

Trump issued the payroll tax order and other executive actions rather than reaching a deal with congressional Democrats on a new bill to shore up the coronavirus-addled economy and individual Americans. Negotiations resumed Wednesday and then quickly died, each side blaming the other.

Meanwhile, "Trump's advisers have sought legal guidance from White House lawyers about whether the president has the authority to eliminate certain taxes, including income and business taxes, without the approval of Congress," The New York Times reports. "The legality of such a move is dubious," because the Constitution gives Congress the sole power to set tax policy, but "the executive branch does have wide latitude" regarding tax collection, and "Trump has not been shy about pushing the boundaries of his authority."