OPINION:
The $2 trillion stimulus bill that President Trump signed on Friday aims to provide a lifeline to businesses affected by coronavirus. However, the bill seems curiously unfair to the workers that make up the backbone of America’s economy. Consider the fact that — in this bill — while employers struggling to stay afloat are able to defer payroll taxes, the worker’s share would still go to the IRS.
As a Tax Foundation economist told CNBC: “Companies would still be withholding from paychecks and remitting that to the IRS, but their half of payroll taxes would be delayed.”
Under the stimulus bill, employer taxes are delayed while they continue to withhold from employees. Under the payroll tax, companies currently pay 6.2 percent of the employees’ income per employee, and the employee also contributes 6.2 percent of their own income, plus an additional 1.45 percent each for Medicare.
A 6.2 percent payroll-tax cut for both the companies and the employees will benefit both employers and workers, and alleviate the coronavirus burden that has been unfairly placed on both important parts of the American economy. This would benefit both employer and employee in different ways.
For the employee, that 6.2 percent will give them more cash on hand to save, invest or spend to help stimulate the economy even further. For the employer, the 6.2 percent that they would save from paying to the federal government could immediately be invested back into the company. It could be used to pay salaries and to help patronize other small businesses that they use to keep their company afloat.
For example, when dining out on the final night before New York City shut down, I spoke with the manager of a wonderful French restaurant that I frequent in Brooklyn. The manager expressed concern not only about her restaurant closing, but also about all of the local bakeries, fish markets and butcher shops she frequented to help buy supplies. With this 6.2 percent payroll-tax cut for businesses, she will have more money to invest into the restaurant. The 6.2 percent may not seem like much, but it can be make-or-break for a small business with slim profit margins.
And for the self-employed, this payroll tax cut will be even more beneficial. Self-employed workers currently pay a whopping 15.3 percent in taxes — 6.2 percent from the company, 6.2 percent from the individual, and their Medicare taxes (1.45 percent) twice. This cut benefits self-employed and freelance workers, who are among the most vulnerable and hardest-hit by the crisis. It will allow them to keep more cash on hand as an employee and have more cash reserves available for the business.
The economy and workforce have been hit by the coronavirus in ways that would’ve been unthinkable just a few weeks ago. It is encouraging to see elected representatives in Washington creating a solution that would help to stimulate our economy and bring security and a sense of stability back to America. However, we must not forget the employees who support the businesses that keep America great. They deserve a break, too.
• Rob Smith is the spokesman for Turning Point USA.
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