Taxes

Trump’s Payroll Tax Order Will Lead to Smaller Paychecks

SK Ashby
Written by SK Ashby

If you are employed by a company that has decided not to participate in Trump's temporary payroll tax holiday, consider yourself fortunate.

Trump cannot suspend the tax permanently as that would require an act of Congress. Any payroll taxes that are deferred now will have to be paid back and the Treasury Department has now issued guidance on how to implement the policy.

To avoid directly billing workers through their tax returns next spring, the IRS and Treasury are telling employers to deduct twice the amount next year.

To accomplish this, employers would take double the Social Security tax out of employees’ paychecks in the first four months of 2021 to pay Uncle Sam for the amount deferred at the end of 2020, according to Pete Isberg, vice president of government affairs at the payroll company ADP.

“Essentially, employees are going to notice that their net pay is going to be reduced next year in roughly equal amounts to what was increased in September through December,” Isberg told Yahoo Money. “For that reason, we thought employees were going to have an opinion about this.”

And in usual Trumpian fashion, the regime is playing catch-up and trying to write policy after it's already been signed by Trump.

The deferral was supposed to begin on Sept. 1 and run through the end of the year, according to Trump’s action. But because the guidance came out so late, employers won’t be able to implement the deferral immediately, Isberg said.

That notice coming out five o’clock on Friday gave us exactly one business day to respond,” he said. “Keep in mind, employers run their payrolls well in advance of payday. So some September payroll was being run early last week.”

If your paycheck increases by a small amount between now and December, is it worth it if your paycheck is reduced by twice that amount between January and April?

We can add this to the list of fiscal time bombs that will detonate once Trump is out of office. And for what? Some small, short-term political gain? A talking point? Payroll taxes fund Social Security and Medicare and Trump is placing funding for both programs at risk because he believes this will improve his chances of being reelected.

Some workers will be in a for big shock next year because they won't be aware of this. But at that point it won't matter to Trump; he'll either be back in New York at Trump Tower (or possibly in Moscow) or safely reelected. He won't even have to pretend to care in either case.