re: Trump's EO to defer payroll tax

quote:

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"A person who makes 40K a year will make $3000 extra and at the same time will be $3000 cheaper for the employer".

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I thought it was only the employee-side payroll taxes being deferred?

I’m not sure how I feel about this. For starters, the ambiguity around whether the deferred taxes will be forgiven seems problematic. If employers decide not to withhold these taxes and they are not forgiven, whose tax liability does it become? If the employers are the ones who will ultimately have to pay, it seems likely that they would still withhold those taxes anyway.

And then there’s the question of how much good this does in the grand scheme of things. When all of the talk about payroll tax cuts came up, I assumed the idea was to reduce cost for employers so that they would have an incentive to hire back more of their workforce. But an employee-side cut does nothing to reduce the employer’s cost unless there’s a corresponding reduction in wages. Which feels like an odd thing to incentivize.

So it might reduce the economic impact for folks who are still working but took salary reductions. But unemployment/furloughs are the larger problem right now. Sure, maybe a lot of companies do pass these savings in to their workers and maybe those workers go spend enough extra money to impact demand in a meaningful way. It just feels like a really inefficient way to stimulate the economy.