White House wants companies to cover bills for payroll tax
WASHINGTON — A debate between the White House and the Treasury Department over President Donald Trump’s payroll tax suspension has delayed crucial information about how the executive order will be carried out, according to people familiar with the matter, leaving businesses across the country uncertain about how to proceed.
The delay in releasing guidelines about the tax suspension comes amid broad backlash to the idea, which was announced by Trump this month after talks with Congress over another economic relief bill stalled. The executive order aims to stimulate the economy by allowing companies to stop withholding payroll taxes until the end of the year, putting more money in workers’ pockets.
But companies and trade groups have called the suspension an unnecessary complication since employees will be on the hook to pay the deferred taxes back when the tax holiday ends. Many companies are expected to opt out of participating to avoid sticking their employees with a giant tax bill next year.
The White House, which is eager to push through a tax cut before the November election, wants the Treasury guidance to ensure that companies, not workers, are held liable for paying the employee portion of the tax when the tax holiday ends.
It is unclear why the Treasury Department has not been willing to issue such guidance, but businesses, which have been fielding questions from their employees about when the tax cuts will begin, would prefer that Congress legislate any changes to tax policy. It is also not clear that the White House would have the legal authority to shift the tax burden in such a manner.
Last week, the U.S. Chamber of Commerce joined more than 30 industry groups to express opposition to the executive order in a letter to the Treasury Department and Congress.
“Under current law, the EO creates a substantial tax liability for employees at the end of the deferral period,” they wrote. “Without congressional action to forgive this liability, it threatens to impose serious hardships on employees who will face a large tax bill as a result of deferral.”
The Chamber of Commerce did not respond to a request for comment on the possibility that the tax liability could be foisted on companies.
The dispute between the White House and the Treasury Department over the guidance was reported earlier by Bloomberg News. A department spokeswoman declined to comment. Judd Deere, a White House spokesman, did not dispute that the Trump administration wanted companies to be liable for the tax but said he would not comment on internal policy deliberations.
“The administration is fully committed to implementing the president’s order to provide muchneeded relief to hardworking Americans,” Deere said.
Announced with great fanfare, Trump’s executive actions could end up offering limited fiscal relief to Americans still struggling to cope with the coronavirus pandemic. The president’s other move, to provide additional unemployment insurance payments of $300 to $400, had been adopted by only 32 states as of Tuesday, and the money might not be available for several weeks.
Henrietta Treyz, director of economic policy at investment firm Veda Partners, said companies were also concerned that if they did not withhold taxes from their workers and those workers left their jobs before the end of the year, then they would be responsible for making the payments. Deferring the tax is also a problem for lawmakers, she noted, because the 6.2% tax funds Social Security.
“Politically this is potentially problematic for Republicans because the payroll tax funds Social Security — a program President Trump has promised repeatedly not to cut and which Democrats immediately seized upon as a campaign talking point,” Treyz wrote in a note to clients this month.