The President has been proposing that one aspect of a pandemic response be for the government to stop collecting the F.I.C.A. tax that supports Social Security. This proposal has received almost no support even from Republican legislators. Despite the requirement of the Constitution that the President "take care that the Laws be faithfully executed "the President's Chief of Staff is proposing that the President issue an executive order waiving the F.I.C.A. tax! Predictably, the Chairman of the House Ways and Means Committee and the Ranking Member of the Senate Finance Committee have slammed the idea. However, the biggest reason that the idea of the President issuing an executive order waiving collection of the F.I.C.A. tax won't fly is that regardless of an executive order it would be crazy for any employer to not pay the F.I.C.A. tax. Any such action will be vigorously contested and would not stand. Employers would be reminded of the consequences of failing to pay the F.I.C.A. tax. There's a 100% tax penalty and that penalty is levied not just against a corporation but personally against the corporate officers. If you're an employer, you never, ever fail to pay the F.I.C.A. tax. Even if your finances are so bad that you're having trouble making payroll, you still pay the F.I.C.A. tax. Shut down the business and stiff the employees their last paycheck if you have to but never fail to pay F.I.C.A.!
And, no, my Republican friends, this isn't just like D.A.C.A. Everyone concedes that the President has discretion in criminal prosecutions. No one in their right mind thinks the President has discretion to stop collecting a tax.
23 comments:
"No one in their right mind thinks the President has discretion to stop collecting a tax."
I think it's an awful idea, but I don't think it's particularly unreasonable to think the chief executive has discretion to waive debts and penalties for back taxes, even if they happen to be FICA taxes. I think most legal experts and courts would find your suggestion that this might be actionable as a violation of his duty to "take care that the laws be faithfully executed" to seem far wackier.
Don't forget about the 2% FICA relief that President Obama gave...
If I’m not mistaken, this reduction was NOT an executive action of the president, but was a statutory change in the rate.
@11:58 AM
That was legislation passed by Congress, not unilaterally enacted by the president. Let's not turn this into another "but Obama" misinformation storm.
@10:10
There's a difference between waiving penalties (relatively simple), forgiving the tax debts themselves (difficult, but not unheard of), and suspending collection efforts temporarily (really, really weird, but maybe allowed?).
@11:58
Obama's 2% FICA relief was authorized in the stimulus bill passed by congress. There's no question congress can change tax laws.
@11:58...2% tax relief is completely different than eliminating the FICA tax all together...
Cant trust the decision making abilities of a president who thinks a cognitive test measures his IQ ¯\_(ツ)_/¯
Isn't the FICA tax one of the few ways the U.S. federal government gets a steady stream of income during the year?
Always thought the government uses this money and puts it back into the trust fund come tax collection season. Without this it seems like the government would be starving for money until tax collection season the next year.
@1:32 PM
Not really.
An awful lot of the income tax is collected as a "steady stream of income during the year" as well, because a huge portion of the annual income tax is collected through employer withholding from payroll (which is itself the source of a huge portion of the annual income taxed via the income tax, in addition to being the primary source of FICA taxes). This is why many accountants view excessive withholding as effectively giving an interest-free loan to the government. And the income tax generates far more revenue than FICA taxes. So waiving FICA taxes is more akin to taking a few pennies out of the government's pot of day to day walking around money.
I'm not sure Treasury even could suspend collection if Congress passed it--their computer systems are so old.
And presumably employers and the self-employed would still have to report how much they would have paid, so that employees can get quarters of coverage and SSA can keep appropriate records of dates first/last insured and issue accurate Social Security statements. I have no idea what changes SSA would have to make to its systems to deal with this but it's probably job security for some folks who know COBOL!
@ 2:20
Thanks for the explanation. So FICA taxes are 12.4 percent (6.2 percent from employer and employee) per paycheck. Was just wondering where all this money goes into the trust fund right away or can it be accessed during the year. Guess this is why I would not want to be a tax attorney.
Republicans and conservatives have been trying to destroy Social Security since August 14, 1935 when FDR signed it into law. Of course, Republicans know that Social Security is popular so they cannot simply come out in favor of repealing it. Instead they pull these kind of tricks to try to defund it and then create some kind of emergency that only they can solve by gradually eroding it away.
The best way to fight this is to use proper language when this happens. For example, the title to this post should have been "Republicans President Trump comes out in favor of defunding Social Security." News articles dealing with this idiotic proposal should correctly frame it as Attack on Social Security. Every news article should have the headline "Republicans attack Social Security-Again."
If Republicans really want to repealed Social Security then they should have to take the political heat for proposing it. I'm tired of letting them get off the hook by "starving the beast" and then pretending we have an emergency that they must solve by slashing the social safety net.
There is nothing sure as death and taxes. The tax law each year is a Congressional duty to raise taxes. (Article 1, Section 7)"Section 7.1: All Bills for raising Revenue shall originate in the House of Representatives; but the Senate may propose or concur with Amendments as on other Bills."
FICA, FUTA, INCOME, EXCISE taxes are revenue. FICA is collected with tax returns(940,941) filed quarterly and annually. Suspending collection is not forgiving collections, it is regulating collections. Taxpayers realize the FICA tax with the income as they receive unconditional "Section 61 income" payments from employers for services. Self-employed people owe FICA on their income tax at year-end ((12.4%)income or($0)if loss)no matter what their draws were for the year.
Who determines the FICA tax? Congress. Who determines the how and when FICA collection, interest, and penalties? IRS code passed by congress.
I am for it. The only way the grey hairs do anything is when there is an absolute disaster. So cut the funding, leave it cut until there isnt enough to pay benefits. The sooner the better. As soon as retirees and the disabled get a 20% benefit cut, the sooner they will do something to fix the broken system.
A temporary suspension of the payroll tax is just a mechanism to get money in the hands of people and boost the economy. If Congress passes legislation forgiving repayment of the uncollected payroll tax, they would also repay any money to the Social Security Trust fund. Just like they did when Congress used this tool and Obama signed it into law. To say this is an attack on Social Security is ridiculous.
10:07, a payroll tax cut only applies to people on payroll, and the very people who need relief are not working right now. A payroll tax cut would not stimulate anything as far as unemployed workers go.
Trump is motivated by his belief that a payroll tax cut will benefit his businesses. He is always motivated by his perception of his self-interests, only. Man, dog, person, recorder, camera ....Do I have it right????
10:53 AM
I don't think they're particularly concerned with "stimulating the economy." Instead, it seems many in Congress and the White House mistakenly believe a much larger problem exists whereby workers are choosing to remain unemployed in order to collect higher wages than they would if working, which they believe is in turn making it difficult for employers to staff back up. In reality, given how low unemployment payments are in most states, I suspect relatively few are making more money than they would if working, even with the $600 supplement. I also suspect an awful lot of jobs are going unfilled because they're awful, low-paying jobs typically filled by migrant laborers who were unable to appear this year, and because most citizens simply aren't willing to risk their lives and health for such poor-paying (and often demeaning) work.
A8:30pm absolutely correct!
A10:07am You have to consider the source. This is done by the same people who want to defund Social Security until it dies, and it does not help the unemployed (the folks most in need of help). It doesn't take a crystal ball to see that this is proposed in order to help social security die "a death by a thousand cuts".
Actually, anything that helps small businesses tends to help create more jobs which, in turn, helps the unemployed. I think that most people are employed by small businesses. Easing the payroll tax burden frees up money to hire more employees. So, it does help the unemployed, in a better way than just handing them money does. With the recent actions, the government put a chunk of money in the hands of people who were not used to having that. Many of them went and put down payments on cars they can't afford or otherwise blew it on things they didn't need. So next month, they will again be struggling to pay the rent. I suppose that spending did help the economy overall, but won't really benefit many of those people much for the long term. A job is what will benefit them for the future. But, if you believe, as many now do, that wealth only comes from the government and the only reason some are struggling is because the government is giving them enough money, well.......
In 2019, income taxes made up 50% of federal revenue, payroll taxes accounted for 36%.
The amount of money returned to consumers by a payroll tax holiday won't create many if any to benefit the economy in general. That's the one place where money can come to the government instead of from the government. I'm glad that no one is really interested in this or see this as a solution to anything. I see it as a way to compromise social security.
@1:16
Supply follows demand, not the other way around. Businesses do not hire in order to create consumer spending, they hire to satisfy consumer spending. That is capitalism. It would be financially irresponsible for a business to hire people when they don't need them, and generally speaking businesses are not financially irresponsible. So a payroll cut, or even providing grant money to businesses directly doesn't actually create jobs, as that is driven by actual demand, not ease of supply. To put it another way, if a business can spend $50 instead of $100 to get back a return of $0-50 dollars, they aren't going to do it.
As to whether it is a bad idea to put a chunk of money in the hands of people (i.e. consumers) who just threw it at putting down payments on cars they can't afford or otherwise blew it on things they didn't need, NO. That's literally creating consumer demand. People have jobs creating those things the consumer doesn't need. That's the point of a stimulus check. If it was something they did need (food, basic necessities, etc.), those jobs are not shut down because even when consumer discretionary income goes down, people need to eat and will go into debt to continue to live.
In regard to whether the checks are helping anyone in the long term, no of course not. That's not the point. They help in the short term, stopping consumer demand from plummeting due to loss of income, which would also prevent unemployment from skyrocketing. We NEED people to be irresponsible with their money.
As to whether wealth only comes from the government and the only reason people are struggling is because the government is not giving them enough money, nobody is talking about building wealth, although generally speaking a government is necessary to build wealth due to availability of public utilities (electricity, water, gas, military, etc.) and services (police, fire, military, etc.) Regardless, you don't build wealth with sporadic checks from the government, you build it through your income exceeding your expenses. But that's not the point of the stimulus checks, or even the proposed payroll tax cuts that you support.
@1:16 PM
I don't think the proposal is for a cut to the employer's share of FICA taxes, and that would, in any event, be a pretty dumb way to try and spur hiring. Hiring is based on an employer's need for labor, which is largely a function of consumer demand, not the amount of capital on hand. If I only need one maid to keep my house clean, I'm not going to hire a second or third maid no matter many tax cuts I get.
Additionally, while a cut in employees' share of the payroll taxes could, theoretically, lead to higher consumer demand for goods and services, thereby spurring demand for labor, this is also a pretty dumb way to spur consumer demand. For one, it didn't have much impact last time we tried this. Also, giving money people who haven't lost their jobs is likely to spur a lot less consumer spending than giving money to people who don't have jobs. But based on your comment suggesting most people spent the last stimulus check on "down payments on cards they can't afford" and "things they didn't need" (a statement that isn't consistent with reality by the way), I get the impression you're more concerned with making sure your tax dollars don't fall into the hands of those "lazy poors" and "welfare queens" than you are with doing what's best for the country.
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