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Conflict Over Payroll Tax Deferral Plays Out at House Hearing

Posted on Sep. 25, 2020

President Trump’s executive memorandum to defer payroll taxes for the rest of the year was repeatedly denounced by Democrats during a House subcommittee hearing for its potential impact on Social Security.

Democratic lawmakers warned at the September 24 Ways and Means Social Security Subcommittee hearing — titled “Save Our Social Security Now” — that the president’s repeated promise to permanently cut the payroll tax if he’s reelected would endanger the future of the program.

“With a permanent payroll tax cut, the president revealed that what he’s after is a permanent cut in Social Security funding,” Senate Finance Committee ranking member Ron Wyden, D-Ore., testified at the hearing.

“According to the chief actuary of Social Security, if Congress were to go along with a plan to eliminate payroll taxes, you’d exhaust traditional Social Security benefits by the middle of 2023,” Wyden added.

Democrats pushed for the House to vote on legislation introduced by Social Security Subcommittee Chair John B. Larson, D-Conn., that would nullify the executive order (H.R. 8171) and on a joint resolution expressing disapproval of the president’s actions (H.J. Res 94).

“We must believe what [Trump] says the first time and pass H.R. 8171 and H.J. Res. 94 to block the administration’s unilateral payroll tax deferral,” Ways and Means Committee member Danny K. Davis, D-Ill., testified. “Social Security is too fundamental to the fabric of our nation to do otherwise.”

Republicans rejected the entire premise of the hearing, saying the GOP and Trump have no plans to gut Social Security and accusing Democrats of engaging in political theater.

“You know and I know that The Washington Post has issued four Pinocchios on this claim,” Social Security Subcommittee ranking member Tom Reed, R-N.Y., said in reference to a fact-checking article published by the newspaper. “What we should not be doing is scaring our American seniors at a time when we are dealing with a pandemic that is taking their lives at an alarming rate.”

Following the hearing, Senate Finance Committee Chair Chuck Grassley, R-Iowa, released a statement to “correct the record” about the lack of a policy to defund Social Security.

“To be clear, the policy doesn’t exist, and if it did no one supports it,” Grassley said in the release. “These false claims were repeated today in the House Ways and Means Committee, but shouldn’t have been. My colleagues in the House and Senate know better.”

Trump has said that any future cuts to the payroll tax wouldn’t affect Social Security funding and proposed that money for the program come from the general fund.

Treasury Weighs In

Treasury released a statement on September 23 explaining that the department would continue making transfers to the Social Security Trust Fund and that the deferral wouldn’t affect the program because it’s temporary and the taxes must be repaid.

“The deferral will have no impact whatsoever on current or future payments received by Social Security recipients, and the Trump Administration remains fully committed to the integrity of the Social Security Trust Funds,” the statement said.

The fact that the taxes must be repaid — and uncertainty about whether they will eventually be forgiven — has led to many private companies opting out of the deferral. However, government agencies and military members had their payroll taxes automatically deferred following the president’s announcement.

But that could be subject to change. Treasury Secretary Steven Mnuchin said during a September 24 Senate Banking Committee hearing that he would follow up on the matter with the Office of Management and Budget.

“I think that is a reasonable issue to people that don’t want to participate, but let me follow up with them [OMB],” he said, following an inquiry by Sen. Chris Van Hollen, D-Md.

Jad Chamseddine contributed to this article.

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