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Democrats Seek to Repeal Payroll Tax Memo; GOP Preps Backing Bill

Posted on Sep. 3, 2020

Senate Democrats started the process for a rollback of President Trump’s executive memorandum temporarily suspending payroll tax collection as Republicans readied legislation to cement the administration’s plan.

Senate Minority Leader Charles E. Schumer, D-N.Y., and Finance Committee ranking member Ron Wyden, D-Ore., in a September 2 letter asked the Government Accountability Office to determine whether the IRS guidance (Notice 2020-65, 2020-38 IRB 1) on deferring payroll taxes for the rest of the year can be defined as a “rule” subject to the Congressional Review Act.

That classification would give the Senate the power to overturn the recently issued rule with a simple majority. Democrats contend in the letter that implementation of the rule, which started September 1, would result in “significant, material consequences to workers,” especially low- and middle-income employees.

The executive memorandum and subsequent notice have been widely panned by accountants and business groups concerned about its implementation. A group of House Ways and Means Committee Democrats in a letter to Treasury Secretary Steven Mnuchin on the same day asked for further clarification of the IRS notice.

The group, led by Rep. Donald S. Beyer Jr., D-Va., said the notice will have an especially problematic effect on federal workers, who the letter said are being used as guinea pigs in the process.

Beyer, who represents the district with the highest concentration of federal workers, has raised concerns that the federal government will be implementing the payroll tax deferral despite numerous outstanding questions.

The National Treasury Employees Union has demanded answers from the Office of Management and Budget on the government’s plan.

GOP Legislation Coming

Despite objections from business groups on the payroll tax deferral actions, congressional Republicans continue to back the administration’s plan. House Ways and Means Committee ranking member Kevin Brady, R-Texas, told reporters that he is looking to introduce legislation to forgive the deferred taxes. Brady said this move will bring certainty and clarity to workers.

“The answer is for Congress — Republicans and Democrats — to make it clear that these payroll taxes will be forgiven, and to do it sooner rather than later,” Brady said. He said it is appropriate for essential workers to be given a pay raise now.

Brady also rejected allegations that the move would deplete the Social Security Trust Fund, saying money will instead be drawn from the general fund.

While Brady acknowledged outstanding questions regarding the executive memorandum, he said the administration would have preferred that Congress pass a stimulus package to help taxpayers.

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