President Trump promised to abolish the payroll tax if reelected in November, saying he would protect Social Security by taking money from the Treasury’s general fund to pay for it.
Trump has frequently floated the idea of cutting payroll tax but has run into opposition in his own party.
At the weekend, he returned to the idea as part of a coronavirus stimulus package, announcing a payroll tax holiday that would leave as much as $100 billion in workers’ pockets, a cut he said he planned to make permanent.
But aides were forced to row back from the promise following a wave of angry criticism that it could mean sweeping cuts to Social Security, which is funded by the tax.
On Wednesday, Trump signaled he meant what he had said.
“At the end of the year, the assumption that I win, I’m going to terminate the payroll tax, which is another thing that some of the great economists would like to see done,” he said.
“We’ll be paying into Social Security through the general fund, and it works out very nicely.”
“If Biden would win, he wouldn’t do that because he’s going to double and triple everybody’s taxes.”
Officials say the measure, announced on Saturday, which would apply to salaries up to $104,000, would mean an average $1,200 wage increase over four months from September.
Experts saw a “tax trap” in Trump’s move, effectively forcing the presumptive Democratic nominee to promise higher taxes for middle-class families if he won election and reinstated the tax. In the event, he sidestepped the question to attack Trump as a threat to Social Security.
Figures, including economic adviser Larry Kudlow, appeared on the Sunday shows to insist that Social Security would be protected.
“I think he was saying that the savings on the deferral will be permanent,” he told CNN’s State of the Union. “He did not mean that he was eliminating the Social Security tax.”
Kudlow was looking on in the White House briefing room on Wednesday when Trump said he planned to do exactly that but replace the money with cash from the general fund, which is maintained by the Treasury.
That still raises the question of whether he could get such a tax overhaul through Congress and where the Treasury can find the money without the payroll tax revenues while facing a record $2.8 trillion deficit.
Trump said rapid economic recovery would fund the cuts.
“We’re going to have tremendous growth … Next year, unless somebody comes in who doesn’t know what they are doing, and they start raising taxes and forcing everybody to leave the country or leave their jobs and companies to close, we’re going to have tremendous growth,” he said.
His claim is certain to meet skepticism. And Robert Shapiro, professor of politics at Columbia University, said the basic reasoning was flawed, as tax cuts were the wrong approach to try to rebuild the economy.
“It does provide an incentive to work since it means less income is taxed, but to go back to work there has to be jobs, and for jobs to rebound, the virus has to be controlled, and the government could spend money to create new jobs such as on new infrastructure projects,” he said.
Trump made the comments during a day dedicated to trying to get children back to school. He announced his administration was providing 125 million masks to school districts and unveiled guidelines for a safe reopening.
He said that children’s development would suffer if they were stuck at home for long and joked: “When you sit at home in a basement looking at a computer, your brain starts to wither away,” he said. “We have a lot of good experience at that just by taking a look at what’s happening in politics.”
