Trump: Pair tax cut with stimulus

White House says must be in package

WASHINGTON — The White House is insisting Congress include a payroll tax cut as part of the next coronavirus stimulus package, potentially complicating talks with lawmakers by pushing a measure President Donald Trump has tried but failed to advance for almost a year.

“As he has done since the beginning of this pandemic, President Trump wants to provide relief to hardworking Americans who have been impacted by this virus and one way of doing that is with a payroll tax holiday,” White House spokesman Judd Deere said. “He’s called on Congress to pass this before, and he believes it must be part of any phase four package.”

Trump’s renewed push comes as Senate Majority Leader Mitch McConnell, R-Ky., prepares to unveil legislation next week he hopes will launch negotiation on the next major coronavirus bill.

Key Republican senators have been cool to the idea of a payroll tax cut in the past, partly because it only helps workers who are actually employed. Congress has rebuffed Trump’s previous demands for a payroll tax cut for individuals, instead approving a round of checks to individual Americans

as part of the $2 trillion Cares Act in March.

But now, as Congress and the administration prepare to write what will likely be the last major coronavirus spending bill before the November election, Trump is again seeking a payroll tax cut. He and some allies view the policy as an effective way to stimulate the economy and quickly give workers a boost.

“High-ranking White House officials have told me that we will not sign a phase four deal without a payroll tax cut,” Stephen Moore, a White House economic adviser, said in an interview Thursday.

It’s unclear if McConnell will include a payroll tax cut in the legislation he intends to roll out next week. A McConnell spokesman declined to comment.

The payroll tax is the 7.65% tax taken out of workers’ paychecks and goes to the

Social Security and Medicare trust funds. President Barack Obama at one point temporarily reduced the tax, but Trump wants to eliminate it for some period of time.

Lawmakers of both parties have been anticipating the upcoming coronavirus bill will contain a new round of checks to individuals, something Trump has signaled public support for.

But it’s unclear whether the legislation could include a new round of stimulus checks and a payroll tax cut, especially since McConnell has been aiming to keep the overall pricetag around $1 trillion — a figure Democrats say is much too low.

Lawmakers in the past have compensated for lost payroll tax revenue by diverting other money from the Treasury Department to continue funding the Social Security and Medicare trust funds.

The government’s response to the pandemic has increased the budget deficit,

and some lawmakers are starting to raise concerns that the tax cuts and spending increases might be misguided and lack desired impact.

House Speaker Nancy Pelosi, D-Calif., and other Democrats have repeatedly voiced opposition to a payroll tax cut. If included in McConnell’s bill, it would become just one more point of contention between the two parties. Democrats and Republicans are already at odds over multiple issues, including liability protections for businesses and others McConnell says must be in the bill; enhanced unemployment insurance expiring in late July; whether to send more aid to cities and states; and how much money for education to include and whether to tie it to schools opening.

Economists and lawmakers of both parties have raised concerns about how helpful the payroll tax cut would prove. In March, Congress delayed payment of the payroll taxes collected from employers,

which helped firms escape some of their shortterm tax burden. Congress could make that deferral permanent, or extend that delay to the payroll taxes assessed by the federal government for workers - both options pushed by conservatives.

Moore and other conservatives have pointed to bipartisan support for the payroll tax cut under prior administrations and argued the president needs to reduce the 11% national unemployment rate to boost his election odds.

Suspending all employer and employee payroll taxes from April to December would increase the deficit by $840 billion, according to an estimate in March by the Committee for a Responsible Federal Budget, a nonpartisan think-tank. More limited versions of suspending the tax, such as doing so for three months, would cost closer to $300 billion — still eating up much of the GOP’s spending bandwidth for the next stimulus package.