Lawmakers step up push for administration to make payroll tax deferral optional for federal workers

Lawmakers are stepping up their push to have the Trump administration make the president’s payroll tax deferral optional for federal workers and members of the military.

Members from both the House and Senate sent letters to Treasury Secretary Steven Mnuchin on the topic Friday, after Mnuchin said in a Senate Banking Committee hearing last month that it’s “a reasonable issue, if people don’t want to participate.” He said he would follow up with the Office of Management and Budget (OMB) on the matter.

“Since federal agencies are currently altering paychecks on a mandatory basis to implement the deferral — regardless of whether individuals want to participate — I urge you to expedite the consideration of our request to make this voluntary as soon as possible,” Sen. Chris Van Hollen (D-Md.) wrote in a letter to Mnuchin and OMB Director Russell Vought. Mnuchin’s comments at the Banking Committee hearing had come in an exchange with Van Hollen.

A group of more than 40 House members, led by Rep. Don Beyer (D-Va.) said in a separate letter that “feedback from civil servants and service members we represent indicates that the withholding of payroll taxes has been chaotic and confusing for many of those affected.” The House members, largely but not exclusively Democrats, said that federal workers’ concerns about the deferral have been exacerbated by poor communication at some agencies about how the deferred taxes will be collected next year.

The House members said that the deferral is already starting to be reflected in the paychecks of federal employees for the last pay period in September. They said the administration should make the deferral optional as soon as possible, because “the longer it takes to initiate changes, the more complex the conversion will be for payroll providers, and the more confusing the paycheck fluctuations will be for those affected.”

President Trump signed a memo on the payroll tax deferral in August to help workers during the coronavirus-related economic downturn. Under IRS guidance implementing Trump’s memo, employers can stop withholding Social Security taxes from workers’ paychecks through the end of the year, but then will have to recoup the deferred taxes by increasing the amount that’s withheld in the first few months of next year.

While the deferral is mandatory for military members and civilian employees of federal agencies, a number of major private-sector employers and state governments have said they’re not going to defer their workers’ taxes. Businesses have expressed concerns about the potential for their employees to see smaller paychecks early next year.

Trump has said that he wants to forgive the deferred payroll taxes if he wins reelection. Such a move would require congressional action.