Payroll tax cut on menu in aid talks, McCarthy says

WASHINGTON — Republicans plan to try to give workers a break on payroll taxes in their forthcoming $1 trillion-plus pandemic relief proposal, which they expect to unveil later this week as the starting point for negotiations with Democrats.

"It's one of the issues that we're proposing," House Minority Leader Kevin McCarthy told reporters at the Capitol. The California Republican met earlier Monday with President Donald Trump, Vice President Mike Pence, Treasury Secretary Steven Mnuchin, White House chief of staff Mark Meadows and Senate Majority Leader Mitch McConnell in the Oval Office.

"I don't think there's too much dispute as to the level of importance" of cutting payroll taxes, Trump said in remarks to reporters during the meeting.

Trump has been pushing a payroll tax "holiday" as part of the next round of COVID-19 relief, but it's not clear exactly how the proposal would be structured. A straight tax cut would be costly, but lawmakers could keep the price tag down on paper by writing the provision as a tax deferral, which would mean paying the tax later, though lawmakers could ultimately waive the payback requirement.

In the $2 trillion March aid bill, Congress waived the 6.2% payroll tax portion paid by employers into the Social Security Trust Fund through the end of this year, at an estimated $352 billion initial cost, according to the Joint Committee on Taxation. However, the nonpartisan committee said all but $12 billion would be repaid by mid-2022, with the remaining revenue loss likely due to firms going bust since the pandemic shut down huge swaths of the U.S. economy.

Employees pay the same 6.2% of wages into Social Security, up to a maximum amount that grows with inflation each year. For 2020, the cap on salary subject to Social Security payroll tax is $137,700.

It wasn't immediately clear whether the new GOP proposal would also waive payroll taxes that fund Medicare, amounting to 1.45% of wages paid by both the employer and employee. That tax is applied without a salary cap.

McCarthy also confirmed that another round of $1,200 direct payments to individuals would be included in the GOP proposal, though he didn't address what income cutoff would be part of the bill. McConnell has suggested $40,000, down from $75,000 in the first round of payments that went out under the March law.

McCarthy told reporters that no one in the White House meeting disagreed with the president on including payroll tax relief.

But on Capitol Hill, lawmakers in both parties have dismissed payroll tax cuts as ineffective compared to other aid measures. For one thing, they wouldn't benefit laid-off workers, and the money would only slowly build up with each paycheck. For lower-income workers, the amounts would be smaller than for those earning sixfigure salaries.