Another round of stimulus checks for most Americans is in and President Trump’s desired payroll tax cut is out.
These are among the latest key developments Thursday as Republicans put the finishing touches on their draft of the next stimulus bill, which Senate Majority Leader Mitch McConnell (R-KY) calls a “starting point” for negotiations with Democrats. Congress is racing the clock to approve a fourth large stimulus package before certain benefits (including the controversial $600 weekly unemployment boost) expire at the end of the month and an August Capitol Hill recess looms on the horizon.
McConnell had hoped to roll out the Republican draft early Thursday, but instead spent the morning continuing to negotiate with top White House officials over its central elements. Now, Republican senators are expected to roll out their separate parts of the package on the senate floor Thursday.
Treasury Secretary Steve Mnuchin told reporters at the White House Thursday morning that the payroll tax cut “won’t be in the base bill,” and that “one of the problems with the payroll tax cut is it takes time, so we are much more focused right now on the direct payments.”
Pressed by CNN on whether it will be included in the bill, Mnuchin said: “Not in this, but we’re going to come back again. There may be a CARES 5.0.”
The Republican draft is expected to include another $1,200 direct payment to most Americans, something Democrats also support, while further negotiations may be needed to iron out the unemployment add-on set to expire at the end of the month. Current thinking is the Republican draft will allow people on unemployment to be able to replace 70% of lost wages, but the $600 flat add-on, which has frequently been accused of providing a disincentive for people to return to work because they are making more on unemployment, is unlikely to be extended by the next bill.
In the past couple of weeks the payroll tax cut has frequently been cited as President Trump’s top priority for the next stimulus bill, but the proposal never gained traction with Congressional Republicans and Democrats were dead set against it.
A payroll tax cut would reduce the amount of Social Security and Medicare tax paid by both employers and employees, who each pay 7.65% in Social Security tax on the first $137,700 of wages, along with a 1.45% Medicare tax on all earnings.
Trump has long said cutting these taxes would boost wages and create incentives for businesses to hire, but critics have countered that the slow-drip approach would not be as effective as another round of direct $1,200 payments, and the payroll tax cut would not benefit those who are currently unemployed. Another obstacle is that it would eliminate the primary source of funding for Social Security, and would have to be made up with general funds that would necessitate cuts in other areas.
According to the most recent Social Security Trustees report, the payroll tax provided $944.5 billion in revenue for Social Security in 2019 while it paid out $1,048 billion in benefits.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
