How a temporary reduction in payroll taxes became the president’s go-to proposal to stoke the economy.
President Trump badly wants to cut the payroll tax. Hardly anyone in Congress shares his enthusiasm.
From the early days of the coronavirus pandemic sweeping the United States, and plunging the economy into a sharp and brutal recession, Mr. Trump has been pushing Congress to temporarily eliminate the taxes American workers and their employers pay to help support Social Security and Medicare. He pushed such a cut on Twitter in March, before lawmakers agreed on the first of what would be several economic rescue packages passed this year:
This week, as congressional Republicans prepared to introduce a bill that will serve as their opening bid for negotiations over the next major economic bill, Mr. Trump told reporters that a payroll tax cut remained “very important” to the discussions.
“It’s very good,” Mr. Trump said. “It’s been proven to be successful. It’s a big saving for the people. It’s a tremendous saving, and I think it’s an incentive for companies to hire their workers back and to keep their workers.”
Most economists, even conservative ones, do not rank a payroll tax cut anywhere close to the top of their list for best ways to support and stimulate the American economy as it struggles to climb out of the recession. They say it will cost a lot in lost tax revenues, while doing little to induce hiring — and excluding millions of unemployed workers from its benefits. A broad cut would heavily benefit people who still have jobs and are earning six-figure salaries, which is not the group that is most in need of federal support right now. And it would cross into the political danger zone around funding for a pair of safety net programs that remain highly popular with the American public.
Bowing to political reality, the Treasury secretary, Steven Mnuchin, said Thursday that the first draft of the next rescue package in the Senate would not include a payroll tax cut.
