Taxes

Trump Says He’ll Sign Order to Defund Medicare, Social Security

SK Ashby
Written by SK Ashby

That's not what Trump's executive order will be directly targeted at, but that will be the net effect.

Speaking to reporters this morning, Trump said he's going to sign an executive order imposing a payroll tax holiday as soon as tomorrow.

President Donald Trump said he expects to sign orders on Friday or Saturday extending enhanced unemployment benefits and imposing a payroll tax holiday as lawmakers have been unable to reach agreement on stimulus legislation that includes those measures.

Trump, speaking to reporters before leaving on a trip to Ohio, said he also expects to sign orders providing eviction protection and on student loan repayment. Unilateral action by Trump likely would set up a legal fight over presidential authority.

Legally speaking, it's not entirely clear if Trump can actually do this. Trump's advisers have appeared on television in recent days and said Trump has the authority to delay the collection of payroll taxes, but not eliminate them. Taxes for the entire period would still be owed when the delay expires.

But that's just it -- a temporary delay of collections would set up a fiscal cliff that the next president and session of Congress will have to deal with. In fact, that has been part of Team Trump's rationale; they say Congress could pass legislation to retroactively make the holiday permanent when the delay expires.

Payroll taxes cover the cost of Medicare and Social Security, as you know, so an order to suspend those taxes is effectively an order to defund those programs. Legislation to retroactively approve Trump's tax holiday would be legislation to defund those programs.

I think Republicans should be careful what they wish for, and what they're willing to enable, because executive authority will not always be in the hands of a Republican. The Trump regime is using the Treasury in extraordinary ways they won't be able to take back.

Congressional Republicans refused to support a payroll tax holiday as part of a new stimulus bill, but they may tolerate or even support Trump's unilateral actions.

Some experts say that even if Trump does issue an order that can survive legal scrutiny, many employers will probably withhold the money anyway because they would face a fiscal cliff.

That’s because while the tax code allows the Treasury Secretary to delay tax deadlines for up to a year during a federal disaster, a mere deferral of the taxes may prompt employers to simply retain the employees’ share of levies rather than giving the money to workers.

“If you’re an employer and [Treasury Secretary] Steven Mnuchin says, ‘I don’t need to see that money for a year,’ what do you do?” asked Daniel Hemel, a law professor at the University of Chicago.

“You could give it to the employee, but then a year from now you might be on the hook for the money,” he said.

At the end of the day, this wouldn't even lead to significantly more hiring, if it leads to any at all.

It's bad policy, but Trump is obsessed with it.