On Thursday, Politico reported that President Donald Trump’s order deferring payroll taxes have thrown businesses into uncertainty, by imposing a dilemma on them.
“Treasury Secretary Steven Mnuchin said on FOX Business that President Donald Trump’s executive action to offer a temporary payroll tax deferral for those making under $104,000 per year would be ‘voluntary’ and up to employers,” reported Ben White and Aubree Eliza Weaver. “That presents an enormously difficult decision for employers who could either decline to give their workers an immediate pay bump or later be forced to claw that money back if the taxes are not forgiven.”
The problem is that the average worker may not understand that this is a deferral — and thus the necessity of clawing back the income later could trigger discontent and financial problems.
“The current payroll tax deferral is largely going to be ineffective and is going to create a lot of problems down the road,” said Guggenheim Global CIO Scott Minerd, who supports a payroll tax cut. “People like you and I understand this is a deferral and we may have to pay it back. … But the average American may not understand that. So when it comes time for employers to recapture the tax it’s going to be a massive problem. What will happen is Congress will get boxed in and they will have to forgive it, which is not fiscally sound.”
The payroll tax deferral was one of four executive actions the president took as stimulus talks have broken down with Congress. Other actions seek to delay evictions and student loan payments, and partially extend unemployment benefits.