The Trump Administration’s Decision to Require the Deferral of Payroll Taxes for Federal Workers and Military Members is creating more Divisions around the President’s Attempt to Provide Short-Term Economic Relief for Workers during the Coronavirus Pandemic.
While many Private Sector Employers are Not expected to Defer their Employees’ Social Security Payroll Taxes under Trump’s Order, the Federal Government is making it Mandatory for its Employees. Federal Agencies have Indicated that the Deferral will Apply to All Eligible Civilian Employees and Service Members.
The Federal Government is the most Prominent Employer to announce it’s participating in the Deferral, and the Administration’s move to Defer the Payroll Taxes of Executive Branch Workers Increases the Impact of an Action by Trump that may have Little Effect beyond Government.
Under the IRS Guidance implementing the Memo, Employers can choose to Stop Withholding the 6.2% Employee-side Social Security Tax through the End of 2020 from the Paychecks of Workers making Less than $4,000 Biweekly, or $104,000 Annually. Employers would then have to Recoup the Money by Increasing the Amount Withheld from Workers’ Paychecks by April 2021.
Business Groups have said that many of their Members are Not Planning to Participate in the Deferral, because Companies don’t want to have a Situation where their Employees are Receiving Smaller than Normal Paychecks in 2021.
There are 2.1 Million Federal Workers and 480,000 Military. The Federal Government has Announced More than 1 Million Civilian Federal Employees are expected to be Affected.
Lawmakers and Unions Representing Federal Employees are concerned about the Deferral for Federal Workers and have been urging the Trump Administration to Allow Federal Employees to Choose whether to have their Own Taxes Deferred. They also have asked the Administration to Provide more Information to Federal Workers about how the Deferral will work, including about how the Money will be Recouped in 2021.
“We have already heard concerns voiced by numerous constituents who do not want their payroll taxes deferred only to have their paychecks substantially reduced at the end of the deferral period,” a Group of Democratic House Members from the Washington, D.C., Area wrote in a Letter. While Lawmaker concerns about the Deferral for Federal Employees have Primarily come from Democrats, some Republicans also have Raised Concerns.
Jacqueline Simon, Policy Director for the American Federation of Government Employees, said Many Federal Workers Live Paycheck to Paycheck and could be Hurt by Getting Less in Take-Home Pay early next year. She also said that Federal Workers with Security Clearances who fall behind on their Bills risk Losing their Clearances and their Jobs in 2021. “There’s many negative aspects for federal employees,” she said.
Trump has said he wants to Forgive the Deferred Taxes if Reelected, and the White House wants Congress to take Action in this Arena. It remains to be seen if the Risk of Smaller Paychecks for Federal Employees and Service Members adds enough Pressure on Congress for them to Pass Legislation to Forgive the Deferred Taxes.
Tony Reardon, National President of the National Treasury Employees Union, said Federal Workers Can’t assume that Congress will Forgive the Deferred Taxes. “The federal employees cannot count on that happening,” he said.
Democrats have expressed Concerns that Forgiving the Deferred Taxes could cause Harm to Social Security. Republicans have said that Legislation on Forgiveness would also Transfer Money from the General Fund to the Social Security Trust Fund to Cover the Lose, but Democrats still have Questions.
Rep. John Larson (D-CT, 1st District), the Chairman of the Ways and Means Subcommittee on Social Security, said that a Transfer from the General Fund would Shift Social Security away from being “an earned benefit paid for by the employer and the employee.” Larson last week Introduced Two Measures aimed at Blocking the Payroll Tax Deferral, and he said he hopes his Legislation will get a Floor Vote later this Month.
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