The top Republican taxwriter in the House offered legislation to forgive deferred payroll taxes as lawmakers continue debating the best way to provide economic relief during the coronavirus pandemic.
House Ways and Means Committee ranking member Kevin Brady, R-Texas, announced legislation September 11 that would forgive deferred payroll taxes for workers. “I call on Congress, including Democrats, who forgave these payroll taxes twice for President Obama, to act now to help our essential workers keep more of what they work so hard to earn,” Brady said in a statement.
An August 8 executive memorandum signed by President Trump instructed Treasury to defer the withholding, deposit, and payment of the employee portion of the payroll tax on wages and compensation paid between September 1 and December 31. Brady’s legislation is intended to help ease concerns raised by corporations that without action in Congress, a payroll tax deferral would only help workers until 2021, when the deferred taxes have to be paid back.
The administration said from the beginning that legislation would be introduced in Congress to forgive the deferred taxes, giving workers much-needed relief. Brady pointed out that his bill would mean an extra $2,480 for a family of four earning $120,000.
But House Democrats have been cool to the idea, with many concerned that it could lead to a permanent elimination of employee payroll taxes and the destruction of the Social Security Trust Fund.
The Joint Committee on Taxation told Brady in a memorandum September 10 that the four-month payroll tax forgiveness would cost the federal government $137 billion. Brady said it would be funded through a general revenue transfer to protect Social Security.
While Brady said he would try to persuade his colleagues to sign on to his legislation, lawmakers have been at an impasse on the latest round of pandemic relief.
Lawmakers Agree More Is Needed
Republicans and Democrats aren't far apart on most tax policies needed to help businesses and taxpayers navigate the pandemic. During a Ways and Means Select Revenue Measures Subcommittee hearing, lawmakers agreed that policies like the employee retention tax credit have helped numerous employers and employees.
Rep. Suzan K. DelBene, D-Wash., said Congress needs to back legislation to expand the employee retention tax credit to allow businesses that borrowed using the Paycheck Protection Program to also use the employee retention tax credit. The measure has bipartisan support and has been praised by businesses groups.
There is also general support for giving relief to businesses that provide clean spaces for workers as laid out in a bill by Ways and Means member Tom Rice, R-S.C. H.R. 7615 would provide a refundable tax credit against payroll taxes for 50 percent of the costs incurred by a business for COVID-19 testing, personal protective equipment, disinfecting, extra cleaning, and reconfiguring workspaces.
But the two parties continue to disagree on many of the provisions in the House-passed Health and Economic Recovery Omnibus Emergency Solutions Act (H.R. 6800), especially elimination of the $10,000 state and local tax deduction cap. Rice called it unbelievable that Democrats want to help “coastal elites” during a pandemic. Rep. Adrian Smith, R-Neb., the ranking member of the subcommittee, said the bill doesn’t come close to solving the problems of taxpayers and won’t get any support from Republicans. “There was no intent for that to be a bipartisan solution,” he said.