Business groups blast Trump payroll tax order as unworkable

A coalition of 30 trade groups including the U.S. Chamber of Commerce on Tuesday sent a letter to Congress and the White House blasting President Trump’s executive order on payroll taxes, saying it was unworkable without congressional action.

“Under current law, the EO creates a substantial tax liability for employees at the end of the deferral period,” the letter said.

“Without Congressional action to forgive this liability, it threatens to impose serious hardships on employees who will face a large tax bill as a result of deferral,” it added. 

Earlier in August, Trump signed an executive order deferring employee payroll taxes, which are automatically collected from paychecks to fund programs such as Social Security.

Trump has said that the tax liability should be forgiven altogether, but without congressional action, Trump does not have the authority to cancel the taxes, meaning that workers could be left with a gargantuan tax bill at the end of the year.

Someone earning $50,000 a year would have to pay more than $1,000 come 2021, the letter noted.

Given the uncertainty, the letter said, most employers would ignore the order altogether.

“Many of our members will likely decline to implement deferral, choosing instead to continue to withhold and remit to the government the payroll taxes required by law,” the letter said.

The idea of cutting taxes that fund Social Security has gained little traction on Capitol Hill, where both Republicans and Democrats set the idea aside early in negotiations over a fifth COVID-19 relief package.

But when talks fell apart, Trump moved to include the policy among a slew of executive orders, which also attempted to provide additional unemployment insurance funds.

Democrats have seized on the policy to attack Trump’s move as representing a cut to Social Security. While the policy doesn’t cut benefits, failure to replenish it could hasten the emptying of the Social Security trust fund, which is already slated to run out in the early 2030s.

Absent intervention, an empty trust fund would lead to benefit cuts.