WASHINGTON (AP) — The Trump administration on Friday allowed employers to suspend collection of some Social Security taxes, although business groups don't like the idea and it may create political headaches for Republicans. Democrats are already saying it would undermine retirement benefits.
The Treasury Department guidance came late in the day, less than 24 hours after the conclusion of the Republican National Convention and a speech by President Donald Trump in which he promised to protect Social Security and Medicare.
It allows employers to offer their workers a temporary deferral of the 6.2% payroll tax employees pay into the Social Security Trust Fund for the rest of this year. The taxes owed would not be forgiven, and instead would come due in 2021.
It's unclear how many employers will take the option, since implementing it would involve additional effort and expenses on their part.
“The guidance allows employers to defer withholding and paying the employee’s portion of the Social Security payroll tax if the employee’s wages are below a certain amount,” Treasury said in a terse press release. The earnings cutoff is $104,000 a year.
Trump had ordered the tax deferral in early August after Congress deadlocked on the latest coronavirus relief bill. The president argues more money in workers’ pockets for the rest of this year will translate to a boost for the economy.
But major business groups traditionally allied with the White House called the idea unworkable for employers and unfair to workers. Employers wanted to avoid the hassle of having to collect the deferred taxes later on from their workers.
Neil Bradley, policy chief for the U.S. Chamber of Commerce, said Friday night the Treasury guidance leaves many practical questions unanswered.
“However, it makes clear that employees will be required to pay more taxes beginning in January to offset any benefit they receive now,” Bradley said. “The only way to achieve a workable proposal is for Congress and the administration to come together and enact a change in the law.”
Lawmakers have little desire to tinker with Social Security.
An analysis by the Chamber found that a hypothetical worker making $75,000 a year would get nearly $179 more every two weeks through the rest of this year. But that same worker would owe about $1,610 next year. A worker making $35,000 would get about $83 more biweekly the rest of this year, and owe just over $750 next year.
Separately, AARP wrote Treasury Secretary Steven Mnuchin to express concerns about the potential consequences for Social Security finances.