The Atlanta Journal-Constitution
Federal workers will have taxes deferred,
Uncertain if deferral is optional; workers could owe more taxes in 2021.
WASHINGTON — The U.S. government will implement an acrossthe-board payroll tax deferral for roughly 1.3 million federal employees starting in mid-September, potentially forcing these workers to take a temporary financial boost now that they will have to repay next year.
The policy, confirmed Monday by a senior administration official, comes in response to a widely panned policy directive issued by President Donald Trump earlier in August. Unions have sharply criticized the government’s decision, fearing that federal workers may not have a choice in whether to take the deferral — resulting in them seeing smaller paychecks in 2021 until the past-due taxes are paid off.
Trump’s order specifically targets the 6.2% tax that employers deduct from their workers’ wages so that the government can fund Social Security. His directive postpones payment of those taxes until January, at which point employers are required to start collecting back what is owed, perhaps by withholding double the amount they usually take until May. The deferral only applies to people who earn up to $4,000 on a biweekly basis, and under $104,000 annually.
Trump in recent weeks has promised to “terminate” the tax bills Americans rack up during that time, hoping to spare workers from having to repay those debts down the road. But he can’t cut taxes unilaterally, and his pledge has earned virtually no support on Capitol Hill, where lawmakers in both parties have been reluctant to touch the funding source for the country’s cash-starved retirement programs – and are unlikely to do so before potentially millions of workers’ tax bills become due.
The idea has proven so problematic that few businesses have expressed any interest in carrying out Trump’s order, even as the government prepares to implement the change for federal employees starting in a few weeks. With so much lingering uncertainty, union leaders unleashed a barrage of criticism on the White House. Everett Kelley, the national president of the American Federation of Government Employees, criticized Trump’s policy on Monday as a “scam that leaves workers with a substantial tax bill right after the holiday season.”
“Workers will have to pay double their regular payroll tax rate during the first four months of 2021 and if they cannot do so, they will have to pay interest and penalties on amounts still owed if they’re not paid back by May 1, 2021,” Kelley said.
Rachel Semmel, a spokeswoman at the Office of Management and Budget, did not respond to questions Monday as to whether the deferral would be optional.
“The president put forward this action to give relief to all Americans during this pandemic,” she said in a statement, adding that the executive branch as an employer is “implementing the deferral to give our employees relief as quickly as possible, in line with the presidential memo.”
The early criticism of the government’s plans highlights the wide-ranging confusion caused by Trump’s order, signed in August in an attempt to circumvent a congressional logjam over coronavirus aid. Lawmakers, tax experts, business leaders and payroll-processing companies all have raised a host of concerns about its implementation, raising the potential that Trump’s bid to boost workers’ paychecks may result in little economic gain.
The Treasury Department and Internal Revenue Service only issued early guardrails describing the program on Friday, four days before Trump’s directive is set to take effect. That’s left few businesses in a position to begin deferring payroll taxes in time for today, creating further logistical and technical challenges that make it “less likely” for companies to participate at all, said Pete Isberg, the vice president of government affairs for ADP, which processes payroll for roughly 670,000 firms.