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Senate Dems Introduce Bill to Make Payroll Tax Deferral Optional

Posted on Oct. 13, 2020

A bill that would allow workers to opt out of President Trump’s payroll tax deferral directive is expected to be introduced in the Senate by a group of Democrats. 

The Protecting Employees From Surprise Taxes Act of 2020, announced October 9 by Sen. Chris Van Hollen, D-Md., is cosponsored by 16 Democratic colleagues, including Senate Finance Committee ranking member Ron Wyden, D-Ore. 

In response to the economic effects of the coronavirus pandemic, Trump signed an executive memorandum on August 8 directing Treasury Secretary Steven Mnuchin to defer the withholding, deposit, and payment of the payroll tax on wages or compensation paid September 1 through December 31 for any employee whose wages or compensation during a biweekly pay period is generally less than $4,000 before taxes. 

Many private companies have opted out of the deferral because the taxes must be repaid, and there’s uncertainty about whether they will eventually be forgiven. But federal employees and military members had their payroll taxes automatically deferred following the announcement, and the Democrats’ legislation would give them — along with any other employees whose employer chose to participate — the chance to opt out. 

“During this time of heightened uncertainty, our public servants deserve the ability to choose what makes most sense for them and for their pocketbooks,” Van Hollen said in an October 9 release

Van Hollen has been a leading voice on the issue in recent weeks. On September 24 he questioned Mnuchin in a Senate Banking Committee hearing on whether Mnuchin would allow government agencies and the military to opt out of the deferral.

“I think that is a reasonable issue to people that don’t want to participate, but let me follow up with [the Office of Management and Budget],” Mnuchin said. 

Van Hollen said in his October 9 release that since Mnuchin described the measure as “reasonable,” Congress should act quickly to pass it. 

The legislation has the support of several national organizations, including the National Treasury Employees Union, the American Federation of Government Employees, and Americans for Tax Fairness.

“This payroll tax deferral plan is nothing but a temporary loan program, and federal employees deserve to choose whether they want to participate,” National Treasury Employees Union President Tony Reardon said in a release.

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