There's No Such Thing as a Free Tax Holiday

Townhall.com ^ | September 3, 2020 | Veronique De Rugy

[Kaslin]

A few weeks ago, President Donald Trump proposed a payroll tax holiday to Americans earning less than $100,000 per year. The gesture is better described as a deferral of the payroll tax burden until April 2021, and that has some people worried. They should be.

Talking about his plan, the president explained, "In a few moments, I will sign a directive, instructing the Treasury Department to allow employers to defer payment of the employee portion of certain payroll taxes from Sept. 1." The deferral will last until the end of 2021. As the president added, "This will mean bigger paychecks for working families."

An actual payroll tax holiday does mean an increase in take-home wages for some. According to recently published Internal Revenue Service guidance on the president's order, employers can temporarily stop withholding the employee's 6.2% share of Social Security taxes for workers earning under $104,000 per year. That means more money in their paychecks for those eligible workers.

This could be significant. A little-known fact is that, for a majority of American taxpayers, the largest share of their federal tax bill is the payroll tax, not the income tax. In the way it's designed, the payroll tax is regressive, so it hits lower-income earners harder. But a temporary reprieve is pretty much where the good news ends for the employees.

For one thing, as noted, the benefit may be short-lived. According to the IRS, unless Congress decides to go ahead and forgive the tax, it will eventually need to be collected by employers and sent to Uncle Sam. This is guaranteed to become a massive headache for employers, who will ultimately have to collect the deferred taxes from their employees.

[Sacajaweau]

Obama did this before. It was forgiven.

[PAR35]

But think of the penalties the government can collect from the underwithholding. And why should employers eventually collect the catch-up. Let folks just write checks in April. Folks will get a taste of what they are actually paying in taxes.

[mo]

somebody is scared we’ll figure how to do it all WITHOUT a payroll tax.

Payroll taxes are SO 20th century

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