The Trump administration is pushing for a massive temporary tax cut in response to the economic disruptions caused by the coronavirus pandemic. The proposal, which is still being discussed in the White House despite receiving a cool reception on Capitol Hill, calls for the suspension of all Social Security payroll taxes starting next month through the end of the year.
According to Jim Tankersley of The New York Times, who spoke to White House economic advisor Peter Navarro about the details of the plan, the temporary cut would eliminate the Social Security and Medicare taxes paid by both employees and employers. Currently, workers pay 6.2% for Social Security and 1.45% for Medicare, and their employers pay the same. Self-employed workers, who cover the full 15.3% tax on their own, would also be relieved of their obligations.
Estimates of the cost of the tax cut proposal vary. The Tax Foundation says the revenue loss would likely exceed $900 billion, while the Committee for a Responsible Budget puts the cost at about $840 billion.
On top of the payroll tax cut, Trump has also proposed substantial assistance to industries affected by the outbreak, such as airlines and cruise ships, which could total tens or hundreds of billions of dollars more.
All told, Trump’s stimulus package would likely exceed $1 trillion — enough to push the annual deficit toward the $2 trillion mark for the year.
In a note to clients Thursday, Chris Krueger of Cowen Research compared the proposal to other recent stimulus and emergency spending packages: “For historical context, Congress authorized $65B in recovery spending post 9/11 (+ $15B for airlines), $787B stimulus in 2009, $100B in 2005 post Katrina, $7B in 2009 for H1N1, $51B in 2012 post Sandy & $5.4B in 2015 for Ebola.”