As people across the country anxiously await their stimulus checks — which come to $1,200 for every adult citizen, as well as $500 for every claimed dependent — there has also been talk of a second, additional stimulus package to help those impacted by coronavirus pandemic. But that conversation took an odd detour Tuesday after President Donald Trump, who'd previously spoken about a second stimulus package, spoke about his preference for a payroll tax cut instead of a second round of stimulus checks.
When asked about a second round of payments to citizens, Trump said, "I like the idea of payroll tax cuts." He had previously expressed support for another stimulus payment, as the one-time payment of $1,200 may not be enough to help those who were hardest hit by the pandemic and the corresponding economic dip. While nothing has been decided on, there is a bill in Congress, the Emergency Money for the People Act, that could have guaranteed an ongoing payment. Afterward, Bloomberg's Jennifer Jacobs tweeted Trump's response, which sparked a great deal of speculation about what's to come for cash-strapped Americans.
Asked at small business event what he thinks about another round of stimulus payments directly to Americans, Trump said: “I like the idea of payroll tax cuts.” pic.twitter.com/3cKHottId4— Jennifer Jacobs (@JenniferJJacobs) April 28, 2020
This also presents some questions about what, specifically a payroll tax cut would entail. Much less how people would potentially benefit individuals, particularly as millions in the U.S. have already filed for unemployment. Here's a look at what that could mean, according to Business Insider.
Payroll Tax by Definition
Anyone who's received a paycheck, other than as a freelancer, has paid a payroll tax. They include things like Social Security, which takes 6.2 percent, and Medicare, which takes out 1.45 percent. These same percentages apply to employers, as well.prevnext
How It Would Help
While it's a small percentage overall, it does add up, and temporarily cutting or suspending payroll taxes would mean both employers and employees would have more money in the meantime. There's nothing official in the works, but Trump advisor Stephen Moore had hinted at similar measures back in mid-March.prevnext
Who It Would Help
While having more money in a financially-strapped time would be helpful, there are some things to consider. Namely, those who've lost their jobs as a result of the pandemic, which has closed countless businesses across the country already, would see no benefit without income. Additionally, those with higher incomes would disproportionately benefit from such cuts.prevnext
Jason Furman, who was an economist under President Barack Obama, told Business Insider that a tax cut would be the equivalent to "a slow drip," and wouldn't provide any meaningful economic surge in spending. "If policymakers wanted to get $800 billion to households, roughly the cost of a payroll tax holiday, then the money would be better spent as a $2,500 check per person than a payroll tax holiday," Furman said.prevnext
Along with the Emergency Money for the People Act, which would guarantee $2,000 a month for several months, Utah Senator Mitt Romney has suggested another one-time payment of $1,000 to everyone in the U.S. over the age of 18. There was also a plan in the House, though it was criticized because it left out employees from businesses that had 500 workers or more.prevnext
It's unclear if the payroll tax cut will end up becoming policy. While the idea has been floated steadily throughout the pandemic, which was first declared a national emergency on March 13, a number of states have slowly started lifting restrictions on self-isolation and social distancing — against the advice of numerous health experts.prev