Tuesday, August 20, 2019

Cutting the Payroll Tax: Will Trump Give the Order?

The payroll tax is a monster.

Payroll taxes are taxes that employees partially pay directly, and partially indirectly via employers. They are taxes on wages and salaries that are used to finance various programs, such as Social Security and Medicare.

The total combined (employer-employee) tax equals 15.3% on income up to $132,900 (with a slight additional tax for some high-income earners). Half is directly paid by employees and the other half by employers which results in reduced wages to employees. Thus, the part paid by employers is really paid indirectly by employees through reduced wages. That is employees, in the end, one way or another, pay the entire thing.

The annual bill amounts to well over a trillion dollars.

David Stockman, the director of the Office of Management and Budget from 1981-1985, in his book, Trumped!, called for the rapid phase-out of this tax.

So the good news is that The Washington Post is reporting that "several senior White House officials have begun discussing whether to push for a temporary payroll tax cut..."

But there is a problem. According to WaPo:
Even though deliberations about the payroll tax cut were held Monday, the White House released a statement disputing that the idea was actively under “consideration.”
“As [National Economic Council Director Larry Kudlow] said yesterday, more tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time,” the statement said.
If Trump really wants to help out his base, he should give the order to cut this tax--and make the cut permanent. Hell, even the Obama administration reduced payroll taxes by more than $100 billion each year for part of his term. Surely, Trump can do much better than that!

Of course, a cut in government spending should match the loss in the payroll tax revenue.



  1. I despise the payroll tax more than any tax. I pay a person to do payroll, while she works for the government taking taxes out of the payroll.
    Obviously we have programs that figure it all out for us, she just has to enter the hours and the wage rate, but, there is considerable time put in to do this, especially for a new employee.
    It’s a “free” benefit for the government. We are required to hold out the money, and send it to the State. The more employees you have, the more work it takes.
    I agree and disagree with the taxes the employers “share” is being less wages the employee would get, only in this, in that with minimum wages, or with Davis Bacon, the State sets the rate one has to pay the employee, taxes or no.
    On the other hand, I agree. For several years I have given my employees a printout of how much money was taken from their weekly check in withholdings, and, how much the company pays to match it. Of course their pay stub always has the break down, but no one ever looks at that. So at the end of the year, I give them a printout with their check with a note that basically says, “this is how much the State stole from you this year, and how much the State coerced me to pay for your wages, I would much rather the money you and I paid for your labor went to you, what could you do with an extra....”
    The average was around $14,000 a year, and not one of them thought their life was better with the State taking it.
    It has probably been the most effective way I have seen to make the average person understand what is taken from them.
    Also, without exception, none of them knew the company had to match their so called contribution, and that pissed them off even more, which is interesting.
    Thanks a lot, Friedman.

  2. As a wise person once said:" No withholding, all taxes due on April 15th, election day on April 16th."