Deep Pockets, the IRS, and the Huge Flaw in Trump's Tax Payroll Deferral

Mish

Trump's payroll tax deferral is fatally flawed by deep pockets and the IRS.

Deep Pockets

The WSJ reports Employers Cast Wary Eye on Trump Payroll-Tax Deferral

The president wants employers to stop collecting the 6.2% levy that is the employee share of Social Security taxes for many workers, starting Sept. 1 and going through the end of the year. But his move, announced in a memo Saturday, doesn’t change how much tax employees and employers actually owe. Only Congress can do that.  

Employers’ biggest worry: If they stop withholding taxes without any guarantee that Congress will actually forgive any deferred payments, they could find themselves on the hook. That is a particular risk in cases where employees change jobs and employers can’t withhold more taxes from later paychecks to catch up on missed payments.

“The Internal Revenue Service will come to that deep pocket” of employers to collect payroll taxes, said Marianna Dyson, a lawyer at Covington & Burling LLP in Washington who specializes in payroll taxes. “Liability is going to stick to the employer like flies to flypaper.”

Dead on Arrival

With much brouhaha Trump signed a Series of 4 Executive Orders, One Requires States Pay 25% of the Cost.

Even Republicans are critical. 

Recall that Senator Sasse Blasts Trump's Executive Orders as "Unconstitutional Slop"

OK, Trump had the right to defer payroll tax collection, but that is it. No companies will do along.

It's back to the drawing board, and negotiating room where 20 Republicans Senators are against Trump's the tax cut idea.

Mish

Comments (51)
No. 1-13
Casual_Observer
Casual_Observer

Trump is a blowhard joker and even the Republicans know it. McConnell told Senate candidates running for reelection they are free to run away from Trump in order to still try to win reelection. Trump is effectively a lame duck president now.

Zardoz
Zardoz

Looks like the idea was to use the deferral as "vote for me or you'll have to pay it back", backed by the full knowledge that he doesn't have the power to deliver that... but it doesn't matter after he's elected.

As someone making over 100k that would still have to pay the tax. This is a non starter. It'll kill social security, and I'll get robbed of all the money I have paid in for decades.

Morons, of course, mostly don't make over 100k, and don't understand any of this beyond 'gib me mah monays', so they'll love it. trump already had the moron vote though, so I don't really see how this is going to help him even if it goes exactly as he'd like.

magoomba
magoomba

A nice 1% tax on EVERY single share of stock traded, up or down, would be a good way to even it all out.

shamrock
shamrock

It's a stretch to say Trump has the legal standing to delay the collection of payroll taxes. First, you have to declare an emergency. So this method of declaring an emergency to get whatever you want is bad bad bad. When a socialist president takes over there will be emergencies for gun violence, health care, climate change, wealth inequality and on and on. You reap what you sow.

Tony Bennett
Tony Bennett

The $400 / week DOA, as well.

For starters, States have to apply for federal funding. In order to get the $300 federal they need the capacity to supply $100. If State is broke, tough luck. Furthermore, those on UE must already be getting a $100 / week in benefits to be eligible. Many part time workers fall under this threshold and will get nada. It would take months to implement ... apply for fed funds ... determine who is eligible ... finally kick out $$s.

The uproar would be HUGE if some States could pull it off and others couldn't.

Sechel
Sechel

It was poorly thought out just like much of what Trump puts out. He probably wanted the p.r. and didn't think the reality would pollute the good will. Will take weeks before everyone figures it out and by then he'll move on to the next gimmick.

It's not happening.

PecuniaNonOlet
PecuniaNonOlet

Trumps timing couldnt be worse...many companies are starting corporate employee layoffs since things have not gotten better and ppp has run out so which companies are going to take this level of risk?

Keep in mind that layoffs come in rounds quarter by quarter depending on economic outlook and this creates an administrative nightmare for payroll and accounting folks and with what real benefit?

And as I mentioned before, if you have outstanding debts to the irs, they can keep you from getting your passport or renewing it -no escape for you. Plan accordingly.

Tony Bennett
Tony Bennett

Pelosi MIA

Not a peep out of her yesterday or today.

Any guesses?

ToInfinityandBeyond
ToInfinityandBeyond

The Republicans have clearly lost the plot at this point. They are going to lose both the presidency and the senate thanks to their absolutely clueless leadership. They are going to set the Republican Party back 10 years. Heaven help us.

Herkie
Herkie

By the way all, Kentucky, Moscow Mitch's home state ranks #48 in jobs recovered since the start of the pandemic. His own people are just not going back to work. How many are going to be pissed off enough to vote for McGrath?

Herkie
Herkie

Well they just announced Biden's running mate and for the first time since 1976 I now plan to sit this election out, and it does piss me off because I consider voting a DUTY! But I cannot vote for Trump and I will not vote for a man with so good a chance of not surviving his first term if his VP is Harris.

I will not knowingly aid that woman to get into the Oval Office.

highschooller
highschooller

Do you thing Trump graduated from high school?

  1. If you are making $1500 a month, 9.3 % deferred from Sept. to December for 4 months give you about $550. I doubt this little money helps you much. But then, you have to pay back in 4 months.
  2. If you are makin g $8000 a month, you are getting a big load of $3000. These high earning guys probably are not going to touch it.
  3. Since only Trump will forgive the money if he is elected, the odd is about 40%
  4. All the payroll are done if computer system, changing these system takes time and
    money. Are there any employer want to change it and change back in 4 months?
  5. President Trump. please take some math if you have time. You are a smart business man, you know the Art of Deal.
Lysander3
Lysander3

If implemented, it would create a momentum that's hard to stop. Once employees start getting a paycheck that's 6.5% bigger than before, there's no way they will ever want to go back. I view that as a good thing. Labor should be encouraged, not taxed. Im not in the pay range that would qualify, but I love the idea. The best bailouts start from the bottom. And once it becomes common place, the IRS is pretty much stuck. They can't go after everyone. And there will be legal challenges if they try. As for what it does to the US budget, well...if the trillions spent on bailouts so far isn't worrying anyone, neither should this. Maybe fight one or two fewer wars in the future and things might balance out.