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Grow Your Business Finances

Trump Considering Payroll Tax Cuts

image for wutzkohphoto/Shutterstock
wutzkohphoto/Shutterstock
  • Payroll taxes require business owners to withhold a percentage of an employee's paycheck to fund federal programs.
  • The president's comment came just a day after White House officials denied that a payroll tax cut was on the table.
  • Trump's possible payroll tax cut is just one option that the administration is considering to prop up the economy.

President Donald Trump floated a potential payroll tax cut yesterday as a reaction to growing concerns that another economic recession could take place before the 2020 election. While speaking with reporters at the White House, the president said he and his advisors are weighing potential options to bolster the American economy, including a payroll tax cut.

Earlier this week, both The Washington Post and The New York Times revealed that White House officials were considering the temporary move. Preliminary discussions about cutting the national payroll tax were just one of the tax cuts being weighed by the administration to bring before members of Congress for approval, officials reportedly said at the time.

"Payroll tax is something that we think about, and a lot of people would like to see that, and that very much affects the workers of our country," Trump said yesterday.

The president's comments contradicted a denial from the White House on Monday that payroll tax reductions were part of any potential plan. While openly discussing the possibility of payroll tax cuts, however, Trump admitted that he was "not talking about doing anything at this moment" on the subject.

 

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Since the Current Tax Payment Act in 1943 reinstated the federal government's ability to withhold income taxes after a failed attempt in 1913, American workers have had their taxes taken out of their paychecks. The move ensured that employees paid their taxes on time, rather than relying on individuals to make their quarterly payments.

With the onus of paying taxes shifting from employees to the employers, business owners have had to make sure to withhold the correct amount from paychecks while also making additional contributions, such as Social Security, Medicare, and state and federal unemployment taxes.

Payroll taxes are so important that any lapse in payment could mean big trouble for business owners. Tax debt can pile up and require assistance from outside agencies. Failure to pay back these debts could result in liens, additional fines and a business being forced to shut down altogether.

As the 2020 election draws closer, voters are keeping a keen eye on the economy. Leading up to his electoral win in 2016, Trump campaigned on an economic policy that promised to benefit the middle class and small businesses, among other aspects of the economy.

After getting a sweeping tax reform signed into law back in December 2017, Trump has been riding high on relatively strong economic numbers. For months he's touted the economy as a major reason why he should be re-elected next year. However, experts warn that a recession could be coming soon if Washington doesn't take certain actions.

Recent tumbles in the stock market and uncertainty bred by ongoing trade tensions with China have caused analysts to wonder if the country is on the brink of another recession. Democratic hopefuls in the 2020 race like Sen. Elizabeth Warren (D-MA) and entrepreneur Andrew Yang have put forward progressive proposals that could reshape the American economy and appeal to a younger voter base. Trump has fired back by blaming the media for trying to upend the economy by reporting on a potential recession in order to dash his re-election bid.

"I think the word 'recession' is a word that's inappropriate [because] it's a word that ... certain people, and the media, are trying to build up because they'd love to see a recession," he recently said. "We're very far from a recession. In fact, if the [Federal Reserve] would do its job, I think we'd have a tremendous spurt of growth."

Andrew Martins

Andrew Martins is an award-winning journalist with a Bachelor of Arts in journalism from Ramapo College of New Jersey. Before joining Business.com and Business News Daily, he wrote for a regional publication and served as the managing editor for six weekly papers that spanned four counties. Currently, he is responsible for reviewing tax software and online fax services. He is a New Jersey native and a first-generation Portuguese American, and he has a penchant for the nerdy.