What A Payroll Tax Deferral Really Means To You
One of the four executive orders signed by President Trump over the weekend is a payroll tax deferral for the collection from September 1 through the end of the year. This applies to Americans earning less than $104,000 annually, or less than $2,000 per week.
The payroll taxes fund Social Security and Medicare. However, the outrageous claims from Democrats that the President Trump’s executive order will mean a cut in benefits for Social Security and Medicare is simply not true, says Treasury Secretary Steve Mnuchin.
“That’s just factually inaccurate. There would be no reduction to those benefits and the president has made that very clear,” said Mnuchin during an appearance on “Fox News Sunday.”
What The Deferral Means For You
Every time you get a paycheck, 7.65% of your wages are subtracted to fund Social Security and Medicare. In particular, 6.2% goes to Social Security; 1.45% goes to Medicare. This year, the Social Security tax is only levied on the first $137,700 of earnings. However, those who earn over $200,000 in wages pay an additional 0.9% Medicare tax.
President Trump’s executive order means the 6.2% that goes to fund Social Security won’t be taken out of your paycheck if your income is below the $104,000 threshold.
Senior White House economic adviser Larry Kudlow spoke in an interview with Fox Business. There, he estimated that the deferral could save the average American about $1,200. This will run for over four months beginning in September.
“With respect to the payroll tax, basically we’re giving 140-some-odd million people who worked through this pandemic, they’re heroes, we’re giving them about a $1,200 wage increase after tax,” Kudlow said.
The maximum benefit for any individual would be $2,149 over the four months the deferral will be in place.
Many Democrats have also complained that the payroll tax is simply deferred, meaning it will be owed at a later date.
But President Trump said if he’s reelected in November, those deferred taxes will be wiped away.
“If I’m victorious on Nov. 3, I plan to forgive these taxes and make permanent cuts to the payroll tax. I’m going to make them all permanent,” Trump said during a news conference at his gold club in Bedminster, N.J. “In other words, I’ll extend beyond the end of the year and terminate the tax,” Trump added.
Critics argue that the payroll tax deferral only benefits those with jobs. Also, they say it doesn’t help the tens of millions of Americans who aren’t collecting a paycheck. The reason for this being that they lost their jobs.
Treasury Secretary Mnuchin says that’s why President Trump also pushed the executive order extending the unemployment benefits of $400 per week.
“Let me just also say for the hardworking people that don’t have jobs, that’s why we’ve extended the $400.” said Mnuchin, adding “Right now we are focused on delivering very needed relief to American families that have been impacted by this terrible COVID economic issue.”