In response to failing stimulus negotiations, President Donald Trump issued an array of executive orders at the beginning of August in order to extend economic relief programs. The president called for a payroll tax cut in those memos. On Tuesday, this initiative went into effect. Who is eligible for a payroll tax cut?
According to Forbes, the payroll tax cut can be applied to individual employees who earn less than $4,000, before taxes, on a bi-weekly basis. In other words, those who earn $104,000 or less per year are eligible for this payroll tax cut. As for what this actually entails, certain employees will be able to forgo paying a payroll tax, which equates to 6.2% for Social Security. It should also be noted that this is only a temporary initiative, as it will last from Sept. 1 until Dec. 31, 2020. During this time, employees will not be financially responsible for any of the penalties or late fees associated with the amount of the total that is deferred. When 2021 comes around, employers will be responsible for paying the deferred payroll tax between Jan. 1, 2021 and April 30, 2021. As a result, your paychecks may be higher in total for the remainder of the calendar year (if you qualify for it and if your employer chooses to implement it), but they will be lower for the first four months of 2021.
Many critics have been opposed to Trump's payroll tax cuts and have cautioned that they can't replace stimulus legislation that Congress would pass. However, at the moment, Congress appears to be at an impasse regarding stimulus negotiations. Over the past several months, Democrats and Republicans have been trying to come to an agreement on another package without success, as both sides disagree on how much the plan should cost. Democrats originally proposed a plan that would total $3 trillion, although they later said that they would compromise on a figure closer to $2.2 trillion. When it comes to the Republicans, none of their stimulus plans have exceeded $1.3 trillion.
On Tuesday, Speaker of the House Nancy Pelosi gave an update on stimulus negotiations following her discussion with Treasury Secretary Steven Mnuchin. The California Democrat said that the two sides disagree on the price point of the package, which has led to this impasse. She told reporters, "Sadly, this phone call made clear that Democrats and the White House continue to have serious differences understanding the gravity of the situation that America’s working families are facing."