Democrats cast doubt on Trump’s payroll tax cut plan for virus

Register now

Key Democrats poured cold water on President Donald Trump’s proposal to include a payroll tax cut as part of his plan to respond to the coronavirus. Senior Republicans also held back from endorsing the suggestion ahead of a key lunch meeting on Tuesday.

Senate Minority Leader Chuck Schumer attacked Trump for talking about “another tax cut” and urged the president to focus on efforts to contain the virus itself, such as paid sick leave for affected workers.

“We first have to deal with the direct issues affecting coronavirus, the health issues,” Schumer told reporters. “And then one thing we could do immediately to deal with the economic issues is emergency unemployment insurance. We’ve done that before. It goes right to the people who are out of work. It puts money in their pockets and is targeted right at the crisis.”

Trump and his top economic advisers will speak with Senate Republicans during lunch to build support for measures to keep fear over the novel coronavirus from infecting the larger U.S. economy. Cutting the payroll tax was one of the measures Trump suggested in a Monday briefing about the virus response, and the president said he’ll present a more complete plan Tuesday.

‘Prevent economic damage’

Payroll tax cuts are a way to quickly get money circulating into the economy. The Internal Revenue Service can implement the change almost immediately and the funds get doled out every two weeks in the form of higher paychecks. However, that’s only helpful to the extent that people are working, said Steve Rosenthal, a senior fellow at the Urban-Brookings Tax Policy Center.

“Payroll tax cuts aren’t particularly suited to this crisis,” Rosenthal said. “If people aren’t going out to eat or attending sporting events, all those workers have been let go or their actual working hours have dropped. The effect would be negligible.”

Ron Wyden, the top Democrat on the Senate Finance Committee, suggested in a statement that a payroll tax cut “wasn’t the best answer in this case.”

“The best way to prevent economic damage is to stop the spread of the virus,” Wyden said. “President Trump isn’t going to wriggle out of addressing this growing public health crisis with tax cuts.”

Wyden said a payroll tax cut will do little to help workers who lack paid sick leave or who have lost work or tips.

House Speaker Nancy Pelosi, meanwhile, didn’t provide a timetable for when the House might act on a Democratic proposal to respond to the coronavirus.

“We’re hoping as quickly as possible, but we’d like to make it bipartisan and that’s some of the outreach we’re trying to do,” she said. When asked whether the House might act this week before both chambers are in recess next week, she said, “we’ll see.”

Republican hesitation

Top Republicans have yet to embrace a payroll tax cut plan.

Senate Majority Leader Mitch McConnell was noncommittal in his opening statement on the Senate floor Tuesday, saying that he looks forward to hearing the administration’s proposals and urging a bipartisan response to the virus.

House Minority Leader Kevin McCarthy also hesitated to embrace the payroll tax cut floated by Trump.

“We are looking at a number of measures” to determine whether “there is an ability to help to keep the economy moving as strongly as it is today,” McCarthy said Tuesday. Republicans want to consider if there’s a “surgical way” to help people who are hurt, such as workers who earn hourly wages, he said.

House Democratic leaders signaled they are focused on measures like paid sick leave and extended unemployment insurance — the kind of proposals Pelosi and Schumer presented on Sunday.

Virginia Democrat Don Beyer, vice chairman of the Joint Economic Committee, said a payroll tax cut doesn’t help people who have lost jobs or work in the “gig” economy.

Beyer said more can be done, including direct payments, as well as ensuring that people without health insurance or paid sick leave can get help.

“These are the folks who could make this outbreak truly disastrous,” he said.

— With assistance from Laura Litvan, Erik Wasson, James Rowley, Billy House and Laura Davison

Bloomberg News