White House reportedly considering payroll tax cut to boost economy
The Trump administration is reportedly mulling the possibility of temporarily cutting Social Security and Medicare taxes as a way to spur the economy amid recent signs of a potential recession ahead.
The Washington Post reported Monday that several unnamed White House officials are discussing a temporary payroll tax cut. The Obama administration temporarily cut payroll taxes by two percentage points from 6.2 percent to 4.2 percent in 2011 and 2012 to boost consumer spending in response to the financial crisis. As the economy improved, the payroll tax cut was allowed to expire and the combined rate returned to 6.2 percent in 2013.
Last week, investors grew concerned at signs of an inverted yield curve, a traditional precursor of a recession. The Trump administration hopes to avert an economic downturn ahead of the 2020 election.
On Monday, President Trump sought to allay recession fears while deflecting blame to Federal Reserve Chairman Jerome Powell. “Our Economy is very strong, despite the horrendous lack of vision by Jay Powell and the Fed, but the Democrats are trying to ‘will’ the Economy to be bad for purposes of the 2020 Election,” Trump tweeted. “Very Selfish! Our dollar is so strong that it is sadly hurting other parts of the world ... The Fed Rate, over a fairly short period of time, should be reduced by at least 100 basis points, with perhaps some quantitative easing as well. If that happened, our Economy would be even better, and the World Economy would be greatly and quickly enhanced-good for everyone!”
Democrats are unlikely to agree to a payroll tax cut, however, as it could potentially undermine the solvency of the Social Security and Medicare funds. CNBC reported that Rep. John Larson, D-Connecticut, who chairs the House Ways and Means Social Security Subcommittee, has proposed to raise Social Security taxes as a way to preserve the trust fund in the future.
The White House later released a statement Monday denying that a payroll tax cut is under consideration, according to the Post, saying, “As [National Economic Council director Larry Kudlow] said yesterday, more tax cuts for the American people are certainly on the table, but cutting payroll taxes is not something under consideration at this time.”
However, Trump confirmed to reporters Tuesday that he actually had been thinking about it. “Payroll tax is something that we think about, and a lot of people would like to see that, and that very much affects the workers of our country,” Trump said, according to the Post. “I’m not talking about doing anything at this moment,” he added.