Trump payroll-tax deferral for federal workers sparks backlash

The Trump administration’s decision to require the deferral of payroll taxes for federal workers and military members is creating more divisions around the president’s attempt to provide short-term economic relief for workers during the coronavirus pandemic.

While many private sector employers are not expected to defer their employees’ Social Security payroll taxes under Trump’s order, the federal government is making it mandatory for its employees. Federal agencies have indicated that the deferral will apply to all eligible civilian employees and service members.

The federal government is the most prominent employer to announce it’s participating in the deferral, and the administration’s move to defer the payroll taxes of executive branch workers increases the impact of an action by Trump that may have little effect beyond government.

“That makes it much more salient,” said Rep. Don Beyer (D), a member of the House Ways and Means Committee whose Northern Virginia district includes many federal workers.

Rep. Jamie Raskin (D-Md.), whose district also includes many federal employees, said, “A lot of people are attempting to just roll their eyes about the whole exercise because it’s so transparently political, but when you look at the number of people affected, a lot of people are going to come to rely on that money being there, which suddenly won’t be there.”

President Trump last month signed a memo on deferring payroll taxes in an effort to provide relief to workers amid stalled talks between the White House and lawmakers over coronavirus relief legislation.

Under the IRS guidance implementing the memo, employers can choose to stop withholding the 6.2 percent employee-side Social Security tax through the end of the year from the paychecks of workers making less than $4,000 biweekly. Employers would then recoup the money by increasing the amount withheld from workers’ paychecks in the first few months of next year.

Business groups have said that many of their members are not planning to participate in the deferral, because companies don’t want to have a situation where their employees are receiving smaller than normal paychecks next year. But the federal government has announced that civilian federal employees and members of the military will see their Social Security taxes deferred. More than 1 million civilian federal employees are expected to be affected.

“The President put forward this action to give relief to all Americans during this pandemic — as an employer, the Executive Branch is implementing the deferral to give our employees relief as quickly as possible, in line with the Presidential memo,” Office of Management and Budget spokeswoman Rachel Semmel said in a statement last week.

Lawmakers and unions representing federal employees are concerned about the deferral for federal workers and have been urging the Trump administration to allow federal employees to choose whether to have their own taxes deferred. They also have asked the administration to provide more information to federal workers about how the deferral will work, including about how the money will be recouped.

“We have already heard concerns voiced by numerous constituents who do not want their payroll taxes deferred only to have their paychecks substantially reduced at the end of the deferral period,” a group of Democratic House members from the Washington, D.C., area wrote in a letter publicized Wednesday.

Sen. Chris Van Hollen (D-Md.), who took the lead on a letter from senators this week that also requested that the deferral be optional for federal workers, said Trump is forcing federal employees and military members “to participate in this program which is really a shell game.”

While lawmaker concerns about the deferral for federal employees have primarily come from Democrats, some Republicans also have raised concerns.

Sen. Susan Collins (R-Maine) joined a number of Senate Democrats on the letter Van Hollen led, and a spokesperson for House Armed Services Committee ranking member Mac Thornberry (R-Texas) said the congressman is concerned about the consequences of the deferral and has asked the Defense Department for information about how it plans to ensure that military members and their families don’t face surprises next year.

Jacqueline Simon, policy director for the American Federation of Government Employees, said many federal workers live paycheck to paycheck and could be hurt by getting less in take-home pay early next year. She also said that federal workers with security clearances who fall behind on their bills risk losing their clearances and their jobs.

“There’s many negative aspects for federal employees,” she said.

Trump has said he wants to forgive the deferred taxes if reelected, and the White House wants Congress to take action in this arena. It remains to be seen if the risk of smaller paychecks for federal employees and service members adds enough pressure on Congress for them to pass legislation to forgive the deferred taxes.

“While Democrats in Congress prioritize their political agenda over the American people by holding up much-needed relief, President Trump is taking action for those who have lost jobs or been financially impacted by the pandemic,” said Trump campaign spokeswoman Courtney Parella. “The President is an ardent supporter of our military, giving them the largest pay raise in a decade following the Obama-Biden administration, and for many Americans and service members, every dollar counts. That’s why President Trump is calling for the payroll tax deferral to be made permanent and why Congress must pass legislation to ensure the men and women of this great nation can begin their road to recovery from this global pandemic.”

Stephen Moore, a member of Trump’s economic recovery task force, expressed confidence that the deferred taxes would be forgiven regardless of whether Trump or Democratic nominee Joe Biden wins the presidential election in November.

“It would be ridiculous to charge people a double payroll tax next year,” he said.

But Tony Reardon, national president of the National Treasury Employees Union, said federal workers can’t assume that Congress will forgive the deferred taxes.

“The federal employees cannot count on that happening,” he said.

Democrats have expressed concerns that forgiving the deferred taxes could cause harm to Social Security. Republicans have said that legislation on forgiveness would also transfer money from the general fund to the Social Security trust fund, but Democrats still have questions.

Rep. John Larson (D-Conn.), the chairman of the Ways and Means Subcommittee on Social Security, said that a transfer from the general fund would shift Social Security away from being “an earned benefit paid for by the employer and the employee.”

Larson last week introduced two measures aimed at blocking the payroll tax deferral, and he said he hopes his legislation will get a floor vote later this month. In the meantime, Beyer said Trump has to do some damage control as commander in chief.

Beyer said that military members “have been more than a little upset” about a recent article in The Atlantic that said Trump had referred to U.S. troops killed in World War I as “suckers” and “losers.” He said that Trump has got “a big perception problem to climb” that may not be solved by a temporary increase in take-home pay.

Trump’s payroll-tax deferral memo was issued before The Atlantic story was published, and the White House has rejected the story.

Updated at 10:08 a.m.