President Donald Trump has fixed his sights on getting a payroll tax cut in the next coronavirus stimulus bill, but it’s unclear whether he can get Republicans -- much less Democrats -- to go along with such a high-cost item that likely would have only a modest impact on the economy.
Trump has been pushing a payroll tax reduction for months and on Sunday used it to draw a line in the sand as lawmakers begin haggling over another round of rescue legislation for a reeling U.S. economy.
“We’re not doing anything without a payroll tax cut,” Trump said in a town hall event hosted by Fox News.
But Trump hasn’t laid out his vision for the size and duration of any payroll tax cut. That would make a big difference for workers -- including those who haven’t faced adverse effects from the coronavirus slowdown -- who would see anywhere from a few dollars to several hundred in bi-weekly paychecks depending on their income.
The 30 million people who’ve lost their jobs wouldn’t get a direct benefit, and economists say a payroll tax cut likely isn’t enough by itself to bolster consumer spending -- a prime driver of the economy -- and spur companies to begin rehiring.
Politically, any payroll tax cut is a heavy lift. Democrats, predictably, are opposed to the president’s proposal. But Republicans in Congress have also been slow to publicly endorse his repeated request for the tax rollback. Senate Majority Leader Mitch McConnell hasn’t highlighted the idea and Senate Finance Chairman Chuck Grassley has said it’s too soon to decide what should be in a bill.
House Speaker Nancy Pelosi on Monday declined to directly respond to Trump saying he would demand a payroll tax cut in any future relief plan. She said there are many other needs, including expanded unemployment insurance and aid to state and local governments.
“I’m not negotiating with the president on television,” she said during an interview on CNN. “There’s no need to be drawing any red line in the sand.”
McConnell and other Republicans already are signaling they want to put the brakes on additional steps by the government that would only add to a budget deficit that is forecast to balloon to $3.7 trillion this year.
Larry Kudlow, Trump’s top economic adviser, reiterated on Sunday that the payroll tax cut was a key priority for the president who wanted to lower costs on employers and employees.