GOP blocks effort to make payroll tax deferral optional for federal workers

Sen. Chris Van Hollen (D-Md.) on Thursday attempted to get the Senate to immediately pass his bill to make President Trump’s payroll tax deferral optional for federal workers and military members, but Republicans blocked the effort.

Van Hollen’s bill would allow the payroll tax deferral to be optional for employees of any employer that chooses to participate in the deferral, including the federal government. Most businesses have not been deferring their workers’ payroll taxes, but the deferral has been mandatory for civilian employees at federal agencies and members of the armed forces.

The bill is co-sponsored by several Democratic senators, as well as GOP Sen. Susan Collins (Maine). The measure is also backed by unions representing federal workers.

Van Hollen argued on the Senate floor that his bill is a matter of “fundamental fairness,” and that passing the measure would limit the amount of deferred taxes that federal workers and military members would have to pay early next year. He said that many federal workers and military members have not wanted to participate in the deferral. 

“If we don’t correct this, the damage will continue to be done, and these members of our armed forces and federal employees will be forced to pay even more back after the holidays,” Van Hollen said.

But Sen. Steve Daines (R-Mont.), objected to Van Hollen’s request for the Senate to unanimously pass the bill. Daines said that the focus should be on having Congress forgive the deferred payroll taxes, allowing people to keep more of their earnings.

“We should be forgiving these taxes as a payroll tax holiday,” Daines said.

Van Hollen vowed to continue to fight for his bill.

“I’m disappointed with the objection and will continue to pursue this,” he said.

Trump signed a memo in August directing the Treasury Department to allow employers to defer employees’ Social Security taxes through the end of the year. Under subsequent guidance Treasury issued, employers can opt to stop withholding payroll taxes from employees paychecks through the end of the year, and then have to recoup the money by increasing the amount withheld from workers’ paychecks in the first few months of 2021.

Trump directed the payroll tax deferral in an effort to provide relief to workers amid the coronavirus-related downturn. But few private-sector businesses have participated, saying they didn’t want to be put in a position where their employees could see smaller paychecks next year. The main employer that has been deferring its employees’ taxes is the executive branch.