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Senate Democrats try to save federal workforce from Trump’s harebrained payroll tax scheme

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Steve Mnuchin and Donald Trump (Mandel Ngan:AFP)

Senate Democrats are trying to save federal workers from having big docks in their pay next spring by allowing them to opt out of the mandatory Trump scheme to give them a payroll tax holiday. Trump spent the whole of the year obsessing about “terminating” payroll taxes as stimulus in the coronavirus pandemic, somehow not grasping the basic issue that people who lost their jobs because of the virus aren’t paying payroll taxes anyway. He was so intent on making this thing that no one thought would be helpful that his administration finally just gave in and imposed it on the only people they could—federal workers. The difficulty is that they’ll have to pay the money back in the first quarter of next year, while we’re still going to be in this pandemic.

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Democrats want them to be able to opt out and continue to have the withholdings. “During this time of heightened uncertainty, our public servants deserve the ability to choose what makes most sense for them and for their pocketbooks. That’s why the President’s payroll tax deferral must be made optional,” lead sponsor of the bill, Sen. Chris Van Hollen of Maryland, said in a statement. These are the payroll taxes that fund Social Security. Trump has vowed to “terminate” payroll taxes entirely, a plan that could “terminate” Social Security by 2023, the chief actuary for the program says. That’s if there wasn’t a substitute funding plan in place. Given that they haven’t managed a substitute plan for the Affordable Care Act in a decade, it’s hard to imagine Republicans coming up with a Social Security plan.

Members of Congress have been urging the administration to allow federal employees to opt out—they’ve done so in both the House and Senate, and private sector employees and employers have been given that choice. Other than the House and Senate, only the semi-governmental, semi-private Postal Service has been given the option. Even Louis DeJoy, Trump’s corrupt toady postmaster general, opted out of suspending withholding. Federal employee unions have also been asking the administration to allow them to give the withholding a pass. Treasury Sec. Steven Mnuchin said in a hearing last month that that was a “reasonable” request, but he hasn’t acted on it, and he and the Office of Management and Budget have kept the policy in place.

So all federal employees who earn less than $4,000 per biweekly paycheck with get the 6.2% bump in pay, but will have to repay that starting in January, with larger withholdings from their paychecks—the regular withholding plus the clawback. So they won’t be able to spend this “extra” pay now because they’ll need it starting in January when their paychecks will be smaller. Which is stupid. But it’s Trump’s big idea so of course it’s stupid. “The President’s payroll tax deferral scheme is nothing more than a scam on hardworking federal employees—making their paychecks look bigger until the end the of the year when they’ll be hit with a surprise increase in their payroll taxes right after the holidays,” American Federation of Government Employees President Everett Kelley said in a statement.

The Democrats’ legislation might be enough of a nudge for Mnuchin to reverse the policy for the remainder of the year, but again, Trump wanted this. He seems to believe that all the federal employees will be so grateful to him for giving them a temporary bonus they’ll vote for him or something. Which shows just how untethered from reality the man is.


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