Business lobby raises concerns over Trump payroll tax break

The nation’s leading business group on Wednesday raised serious concerns about President Donald Trump’s move to defer Social Security payroll taxes for American workers, warning that the plan for a shot of economic relief during the coronavirus pandemic could prove unworkable.

The U.S. Chamber of Commerce, a White House ally in battles to cut federal regulations and taxes, said in a letter to Treasury Secretary Steven Mnuchin that Trump’s directive is “surrounded by uncertainty as to its application and implementation” and “only exacerbates the challenges” for companies trying to quickly put his action in place.

There was no immediate reaction from the administration.

Trump on Saturday directed the Treasury Department to temporarily defer the 6.2% Social Security tax on wages paid by employees, beginning Sept. 1 and lasting through the end of the year.

A deferral leaves workers still on the hook for the money later on. But Trump said his ultimate goal is to make the tax break permanent, which would require congressional approval. That appears unlikely for now: Democrats have blasted Trump’s plan as an attempt to undermine Social Security’s finances and Republicans seem to have little enthusiasm for the idea.

There’s a little more than two weeks before the payroll tax plan is supposed to go into effect, and the Chamber’s misgivings compound the problems for a president who wants to be seen as taking decisive action in the face of a stalemate with Congress over another pandemic relief bill.

The Chamber’s chief policy officer, Neil Bradley, called the president’s move “well-intended to provide relief,” but raised questions about whether it would be workable.

“There remains widespread uncertainty on how businesses will implement and apply the executive order, and as American employers, workers and families work to navigate the COVID-19 crisis they need clarity not more confusion,” Bradley said in a statement.

In the letter to Mnuchin, the Chamber pressed to find out whether the tax deferral would be optional. If it’s employers who get that flexibility, it could make it easier for businesses to adjust. But then the tax deferral would not pack the economic punch for which Trump seemed to be reaching.

Among the potential problems cited are whether businesses would be liable for repayment of deferred taxes, and what to do about short-term workers and those who earn part of their compensation from bonuses.

The letter also raised questions about whether a tax deferral would have much impact on the economy if workers have to pay the money back. Some critics have said people might just save the money, not spend it, knowing that the government would ask for it back.