Ernst Payroll Tax Cut Not Included In GOP COVID Relief Bill

Iowa Sen. Joni Ernst for months has championed federal tax relief for workers most impacted by the coronavirus pandemic. But as Senate Republicans rolled out their coronavirus relief legislation Monday, Ernst’s proposal was not included, in part due to the impact a decrease in taxes would have on Social Security and the federal deficit.

Ernst’s FRNT LINE Act, introduced one week ago, suspends federal income taxes for “essential workers” up to an annual income cap. The bill also halts federal payroll taxes (Social Security and Medicare) for essential workers earning up to $50,000 annually.

“We certainly want to reward those folks that keep America up and moving,” Ernst said last Tuesday at a press conference.

President Donald Trump also has advocated for a payroll tax cut to be included in the next phase of coronavirus relief, but the idea did not have broad support among Republicans and was unpopular with Democrats.

Sen. Chuck Grassley told reporters last week he does not support a payroll tax cut because it would amount to little extra money in Americans’ paychecks and could be seen as undermining the Social Security Trust Fund.

“They’re going to see a little bit of money,” Grassley said, according to the Des Moines Register. “Are they going to spend it? Some people will. Some people won’t even notice they’re getting it, if they’re getting a lot of overtime or different hours that they’re working.”

Critics of Ernst’s proposal point to her past remarks on Social Security reform, particularly the “sit down behind closed doors” comment from a year ago. Even her paid family leave proposal involved Social Security because she wants parents to be able to withdraw a portion of their Social Security funds in order to take time off work to care for their children.

“Point blank, Iowans cannot trust Sen. Ernst to safeguard Social Security, and they’re ready to elect a new senator who will,” said Iowa Democratic Party spokesperson Jeremy Busch.

Instead of a payroll tax cut, Republicans’ HEALS Act proposes another round of $1,200 direct payments to individuals and $200 per week in extra unemployment insurance, down from the current $600.

Forbes recently laid out several reasons why politicians and financial experts are wary of a payroll tax cut, including the negative impact on Social Security and Medicare; outsized benefits for higher wage earners; small returns for taxpayers; and the fact it does not help retirees or the unemployed.

Sen. John Cornyn, R-Texas, called a payroll tax cut “problematic.”

“I think it’s problematic because, obviously, the trust funds for Social Security and Medicare are already on their way to insolvency,” Cornyn said. “I’m not a fan.”

 

By Elizabeth Meyer
Posted 7/28/20

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