Congressional Republicans and prominent conservatives are pushing back against President Trump’s payroll tax cut executive action, saying it’s mistargeted, unlikely to be effective, and an unconstitutional power grab.
Trump’s executive action would allow employers to defer paying payroll taxes through the end of the year for employees who make less than $100,000. Payroll taxes fund Social Security and Medicare. The payroll tax cut was one of four executive actions Trump signed on Saturday after Congress failed to pass another coronavirus relief bill.
“Republicans in Congress are rolling their eyes at the payroll tax cut,” said Brian Riedl, an economist at the conservative Manhattan Institute.
Historically, tax cuts have been a popular Republican response to economic weakness, and it’s typically easy to sell tax cuts to families and the conservative base. Yet, many Republicans feel a tax cut is not the right solution for the coronavirus-induced recession.
“It’s the wrong tool for the job. Payroll tax cuts generally benefit upper-income individuals with a job when help is most needed for low-income people, the jobless, and senior citizens,” said Riedl.
Many Republicans have expressed relatively blunt opposition to the tax cut in the past few days.
“For tax policy to make a big difference, it’s got to be long term,” said Senate Finance Committee Chairman Chuck Grassley on Thursday. He also said earlier in July that the payroll tax cuts would be a “public relations problem” and would have little economic impact. Grassley, though, appeared supportive of all of Trump’s executive actions on Saturday.
Multiple economists told the Washington Examiner that the tax cut was unlikely to help businesses and spur economic growth in the long-run because it will only be applied for a few months, and most businesses expect to pay the taxes retroactively next year.
Another Republican, Rep. Chip Roy from Texas, said Saturday he has “substantive concerns” about the executive action and that “this is not how we should be making policy & allocating federal dollars.”
There are even more Republicans against the payroll tax cut who are not vocalizing their opposition, said Riedl, because of the fear of facing Trump’s wrath on Twitter or elsewhere. Most Republicans would rather remain silent on this issue and allow GOP leadership to fight the president on an initiative that they don’t think will survive, he added.
Trump slammed Sen. Ben Sasse on Monday morning, calling him a “RINO” and claiming he’s “gone rogue,” after the Republican from Nebraska labeled his executive actions “unconstitutional slop.”
Many of Trump’s executive actions from Saturday are expected to face legal challenges, and at least some conservative groups that initially supported the payroll tax cut are now pushing back against it, questioning Trump’s authority to unilaterally force the issue.
“The administration is basically giving the middle finger to Congress saying, well, you appropriate these funds for these purposes, but we’re going to take those funds and use them for something else,” said Jason Pye, vice president for legislative affairs at Freedomworks, a free-market group.
“That’s not how this works. You have a constitutional crisis right now,” said Pye, referring to the reprogramming of funds for some of Trump’s executive actions. Pye said that there would have to be some “horse-trading” with Democrats to make the tax cut deferral permanent by forgiving it altogether.
Some former Trump administration officials said that there were far bigger problems than the payroll tax cut that the administration should be focused on.
“The payroll tax cut is small peanuts compared to the $600 a week unemployment benefits, which essentially raises the minimum wage threefold,” said Tomas Philipson, former acting chairman of Trump’s Council of Economic Advisers. Philipson said the unemployment benefits are far too costly for the federal government and could disincentivize people from working by paying them more than a job would.
“Maybe the administration is not looking at this quantitatively, if you have a more than 100% tax on work for the unemployed population, cutting the payroll tax by 7% is not going to make much of a difference,” said Philipson.
