Forget Another COVID Bailout President Trump Should Chart His Own Course To Rebuild The Economy
In a recent op-ed in The Wall Street Journal our friends Stephen Moore and Phil Kerpen wrote that President Trump needs to reset the debate on the latest coronavirus relief bill, and we agree.
As Messrs. Moore and Kerpen pointed out, Senate Republicans have scuttled their best pro-growth idea—a payroll tax cut—and instead released a $1 trillion spending bill. Last week Mr. Trump acknowledged that compromising with Speaker Nancy Pelosi is a fool’s errand, because the House won’t agree to anything that boosts growth and job creation. The Democratic plan includes a six-month extension of the $600-a-week unemployment bonus and $3 trillion in new spending. It would sink the economy and imperil Mr. Trump’s re-election.
The solution proposed by Moore and Kerpen is an Executive Order forbearing collection of the payroll tax, the same strategy President Trump used to postpone the filing date for federal income taxes.
Payroll taxes are shared by the employer and employee. Each is responsible for a 6.2% levy that goes toward Social Security, as well as a 1.45% tax that funds Medicare. In 2020, the Social Security tax is subject to a wage base limit of $137,700.
As Moore and Kerpen explained in The Wall Street Journal, Treasury Secretary Steve Mnuchin has the power, enunciated in Section 7508A of the U.S. Tax Code, to postpone the IRS' "performing [of] certain acts ... for a taxpayer determined by [Mnuchin] to be affected by a federally declared disaster."
"The president needs to pull an end run, and there’s a legal way to do that," Moore and Kerpen wrote. "He should declare a national economic emergency and announce that the Internal Revenue Service will immediately stop collecting the payroll tax.
"To protect benefits," they continued. "[Trump] should order Treasury to put bonds into the Social Security and Medicare trust funds."
Moore and Kerpen noted that President Obama had done just that in 2011, making a similar move by Trump harder for presumptive Democratic nominee Joe Biden to reasonably object to.
As Steve and Phil noted, there’s the hitch that taxpayers could still be on the hook for the taxes once the deferral period – whatever it is – expires, but that holds out the prospect of adding a game changing element to the 2020 presidential campaign.
As part of the announcement of the deferral President Trump could also pledge to sign a bill—now or after the new Congress takes office on Jan. 3—to forgive those repayments.
"That would make the election a referendum on middle-class taxes. Mr. Trump can give Americans a tax cut now, and sign it into law later," Moore and Kerpen wrote. "This bold act would flip the political tables. Democrats can’t credibly call it a tax cut for the rich."
Even better, it would give Republican House and Senate candidates something to campaign on and energize the Republican base, which is now in a state of near rebellion over the idea of trillions more in spending, which is guaranteed to include billions in Democrat priorities as the price of passage. The Phase 4 stimulus negotiations are a train wreck for the GOP. There is no possible positive outcome. Except this strategy, which could be a game-changer for the economy and the GOP’s congressional election prospects.
And the President sounds like he is warming to the idea. At a White House press briefing Monday evening, President Trump said he does indeed have the power to unilaterally suspend the collection of payroll taxes.
“I can do that also through an executive order,” Trump said at the briefing, “so we’ll be talking about that.”
We urge CHQ readers and friends to call the White House at 202-456-1111 or use this link to email the White House to let President Trump know you back him and want him to make a bold move to enact pro-growth economic policy and rearrange the political chessboard for the 2020 election by immediately declaring a national economic emergency and announcing that the Internal Revenue Service will immediately stop collecting the payroll tax.
congress relief bills
national economic emergency
payroll tax cut
Section 7508A of the U.S. Tax Code
Treasury Secretary Steve Mnuchin