House Speaker Nancy Pelosi and Senate Minority Leader Chuck Schumer are resisting President Donald Trump’s calls for a temporary payroll tax cut, but they backed such a move during Barack Obama’s administration.
The rate for the Social Security payroll tax is currently 6.2 percent for both the employer and the employee.
On Monday, Trump proposed a cut to the payroll tax, as well targeted loans and tax breaks to industries most impacted by the coronavirus outbreak.
As news of the president’s ideas began circulating over the weekend, Pelosi and Schumer responded in a joint statement, charging Trump with putting the interests of corporations above the American worker.
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“In light of reports that the Trump administration is considering new tax cuts for major corporations impacted by the coronavirus, we are demanding that the administration prioritize the health and safety of American workers and their families over corporate interests,” Pelosi and Schumer said.
They sang a different tune during Obama’s administration, when both stood firmly behind payroll tax cuts.
In a 2011 news release celebrating the extension of a payroll tax cut of 2 percentage points, then-House Minority Leader Pelosi said, “Today is a victory for all Americans — for the security of our middle class, for the health of our seniors, and for economic growth and job creation.”
“We still have work to do to ensure this extension lasts throughout 2012. Today, I have appointed conferees who will begin work immediately on a bipartisan bill that will create jobs, grow our economy, and strengthen our middle class,” she added.
Schumer chastised the Republican-controlled House for its failure to swiftly approve 2011 payroll tax cut.
“House GOP trying to play catch-up on jobs but their stalling of payroll tax cut shows they are still putting politics before recovery,” Schumer tweeted.
It should be noted the country was two years out of the Great Recession at that point, though the economy was only experiencing a 1.6 percent growth rate, down one point from the previous year.
In 2012, a re-election year, Obama signed a payroll tax cut extension into law.
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“This tax cut makes a difference for a lot of families,” Obama said at the time.
Fiscal responsibility does not seem to be the reason Democrats are resisting a payroll tax cut now.
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The coronavirus response legislation proposed by Pelosi includes free coronavirus testing; paid emergency leave (with 14 days paid sick leave and up to three months of paid family and medical leave); “enhanced unemployment insurance” benefits; expansion of food stamps, student meal and seniors nutrition programs; and increased funding to Medicaid.
House Minority Leader Kevin McCarthy told reporters Thursday that Pelosi’s bill has some “major problems.”
One issue McCarthy identified was the paid family leave proposal, noting it has no sunset provision and no exemptions.
In other words, the bill will straddle employers with a new unfunded mandate in perpetuity, thus making their cost of doing business much higher.
McCarthy further highlighted there has been no scoring for Pelosi’s bill, meaning she is asking members to sign an open-ended check.
Senate Majority Leader Mitch McConnell panned the bill in a speech from the Senate floor Thursday, calling it an “ideological wish list.”
“Unfortunately, it appears at this hour that the Speaker and House Democrats instead chose to produce an ideological wish list that was not tailored closely to the circumstances,” McConnell said.
“One is reminded of the famous comment from President Obama’s first chief of staff: ‘You never want a serious crisis to go to waste,’” he added.
McConnell echoed McCarthy’s concern about the paid sick leave mandate the bill places on businesses.
The majority leader argued the provision could put “thousands of small businesses at risk,” due to their inability to afford the mandate.
Fox Business Network’s Charles Payne suggested on Thursday the only reason Democrats oppose the payroll tax cut now is political in nature.
“Let’s not politicize it,” Payne said Fox News’ “America’s Newsroom.”
“I don’t understand why the Democrats would be against a payroll tax cut. I just really don’t,” he continued. “It helps small business employers a lot. It helps the employees a lot.”
Payne said it “would be a huge shot in the arm to the economy,” adding that “really what we are trying to find is a way to specifically focus on people who don’t have cushions.”
Alfredo Ortiz, president of the Job Creators Network, highlighted in a Thursday Op-Ed for The Hill that the vast majority of Americans pay more in payroll taxes than they do in federal income tax.
“The payroll tax is the biggest fiscal burden facing most Americans across the country,” he wrote.
“Nearly 70 percent of taxpayers pay more in payroll taxes than in federal income taxes. At more than 7.6 percent of every paycheck, this tax is almost twice as large as the amount that ordinary employees pay in income taxes.”
“By cutting the payroll tax, take home incomes rise along with consumption,” Ortiz added.
“According to Mark Zandi, chief economist at Moodys Analytics, gross domestic product increases by 80 cents for each dollar cut in payroll taxes. This is among the fastest and most direct methods to address the downturn.”
He further argued that cutting the tax for employers as well would provide “small businesses, the biggest job creators in the country, with the same relief as employees” and “allow them to keep more of their earnings to keep their businesses afloat during this difficult period.”
To Pelosi and Schumer the message is clear: Now is not the time to play politics.
Let’s stick to the things we know help strengthen the economy and fight the coronavirus.
Leave the rest for a future debate.
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