Trump extends unemployment payments, defers payroll tax

hank

https://www.npr.org/2020/08/08/900516854/in-executive-actions-trump-extends-unemployment-benefits

This would seem to have investing implications. I‘ve heard elsewhere that the payroll tax is suspended (oops - “deferred“) only for those earning less than $100,000 per year (last year’s tax return). My pension and SS don’t total that much, but I could easily bump up over that $100K with a substantial distribution from traditional IRA for a major expense. Suspect others are in a similar situation. Also, anyone doing a Roth conversion (or who did one last year) might push their reported income over $100K in the process and miss out on this latest perk. These knee-jerk tax policies set your head spinning.

No idea how “deferring” payroll taxes until January is going to help anyone. Stimulate the economy & stock market until just past the election? ... Than let it rain (or something like that) on the next fella who takes over in January with the payroll tax having to double? Good grief.

MikeW

HI Hank. Well this was pure political theatre and will be challenged in the courts. He doesnt have the authority to cut taxes or continue unemployment payments. Thats Congress's purview. Even if he did it still represents a cut in unemployment benefits of 200-300 a week. In addition, how are seniors going to feel about seeing payroll tax deferrals impacting funds going to Social security. He's doing anything he can to try and change the narrative away from COVID. I dont think this will do it.

rforno

Cutting the payroll tax doesn't help anyone who's out of work. But it gives Tweety Amin a talking point about how he "cut taxes" going into the elections.

The payroll tax cut is also a backdoor way of attacking Social Security and Medicare, I think....yes?

Mark

The winners and losers in a payroll tax cut are....

This is from a Forbes article in Early May. (not behind a pay wall)

Payroll Tax Cut Winners and Losers

catch22

Would be nice to expand on this topic; but I continue to fall back to the aspect that Trump remains to be mentally impaired; as was apparent in his demeaning behavior just before and during his involvement in the Republican debate.
He remains the most dangerous person in the world; and changes the scale of what I thought was wrong during the Vietnam era......1965-1975, and the ramifications for years to follow.


Fini

Crash

He remains the most dangerous person in the world Truth. Not to mention: the most worthy of contempt. The most ignorant. The most heartless. The most corrupt. And the most Orange. P.O.S.

expatsp

He's "deferring" the payroll tax until end of the year. So everyone owes the same as always, in theory they'll just get one big bill 12/31 (or January 2, I guess.) I say in theory, because if I'm a business, I'm going to keep withholding same as always, rather than docking my employees' entire salary the last month of the year. So even if this passes the courts, I suspect the practical effect will be zilch. Same for the unemployment benefits: he's ordering it but doesn't have the money to back it up.

This is the Trump University of stimulus.

Old_Joe

"he's ordering it but doesn't have the money to back it up"

Sure he does. He can mortgage his new fence... the one he's building with money "diverted" from the military budget. What's another diversion or two in an election year?

msf

"If I'm victorious on Nov. 3, I plan to forgive these taxes." This is buying votes, pure and simple. Apparently perfectly legal. Still, I find such crude quid pro quo odious:

To quote Justice Brennan of the United States Supreme Court, in his 1982 majority opinion in Brown v. Hartlage (456 US 56):

We have never insisted that the franchise be exercised without taint of individual benefit; indeed, our tradition of political pluralism is partly predicated on the expectation that voters will pursue their individual good through the political process, and that the summation of these individual pursuits will further the collective welfare. So long as the hoped for benefit is to be achieved through the normal processes of government, and not through some private arrangement, it has always been, and remains, a reputable basis upon which to cast one's ballot.

To follow the terminology of Pamela Karlan (1994), the Constitution permits candidates to buy votes wholesale, from many voters with a single promise of political action, but not retail, from a single voter with a promise of a private side-payment.

Kochin, Michael S., and Levis A. Kochin. "When Is Buying Votes Wrong?" Public Choice 97, no. 4 (1998): 645-62. Accessed August 9, 2020. http://www.jstor.org/stable/30024452.

expatsp

@msf, Trump surely intends his offer to buy votes, but by promising to end the payroll tax, he's in practice promising to end Social Security, which payroll taxes fund. I'm sure he's too ill-informed to know that, but I have my doubts as to how well this will play with the electorate.

Crash

"terminate the FICA tax."
https://socialsecurityworks.org/2020/08/08/trump-terminate-social-security/?fbclid=IwAR02DknL3pPiZ8dixYtsnxN0ubFhmMVI0gslm2TQvoJ3smrI6tUXP5PTgVY

msf

Obama reduced (admittedly not down to zero) social security taxes without reducing the amount of money going into SS. Trump virtually never provides details of how anything works ("I'm sure he's too ill-informed to know that"). So, unlike many others, I'm not willing to say that terminating social security taxes must entail defunding SS.

The temporary reduction in the Social Security payroll tax for employees and the self-employed has drawn mixed reactions from policymakers. Some observers express concern about the potential impact of the payroll tax reduction on Social Security’s long-term finances, despite the general revenue transfers to protect the trust funds from a loss of payroll tax revenues. These observers point out that, although the payroll tax reduction is temporary, the possibility remains that Congress could continue to extend the payroll tax reduction or make the payroll tax reduction permanent in response to political or other pressures. In addition, they maintain that the general revenue transfers to the Social Security trust funds introduce an element of general revenue financing to the Social Security program, signaling a departure from the self-financing mechanism that has been in place since the program’s enactment in the 1930s that could jeopardize the future of the program.

https://www.everycrsreport.com/reports/R41648.html

I do however completely agree with last sentence above concerning a subsequent risk to social security. FDR supposedly said:

We put those pay roll contributions there so as to give the contributors a legal, moral, and political right to collect their pensions and their unemployment benefits. With those taxes in there, no damn politician can ever scrap my social security program.

https://www.ssa.gov/history/Gulick.html

davfor

This seems to be mostly smoke and mirrors designed to grab headlines for a few days and provide the appearance something is being accomplished.....

royal4

Old_Joe said:

"he's ordering it but doesn't have the money to back it up"

Sure he does. He can mortgage his new fence... the one he's building with money "diverted" from the military budget. What's another diversion or two in an election year?

No worries... he'll just redirect some of the money Mexico is giving us for the wall. ;^)

hank

msf said:

"If I'm victorious on Nov. 3, I plan to forgive these taxes." This is buying votes, pure and simple. Apparently perfectly legal. Still, I find such crude quid pro quo odious:

And odious is the perfect word. Thanks @msf

The Munchkin was on Chris Wallace’s Sunday Fox program today. He repeated that odious quid pro quo offer near verbatim. When Wallace pointed out that it might bankrupt Social Security and Medicare to forgoe that tax, Munch said they would transfer the exact amount from the general fund into the SS trust fund to compensate .... It got even sillier after that.

(Of course, my Ma taught me that money grows on trees.)

Crash

omg. He is SO stoopid and SO evil.