Policy Question on Payroll Tax Holiday

This post will be updated sporadically with a policy question that troubles me. People who want to follow these thoughts need to either check this blog or my groups Policy & Politics and Finance Memos on Facebook.

The payroll tax holiday in the 2.0 trillion pandemic stimulus bill includes a requirement that businesses repay payroll tax relief in the future. A previous payroll tax holiday created in 2010 had the Treasury reimburse the Trust fund with general tax revenue.

Many defenders of Social Security thought the 2010 approach was bad policy because historically only payroll taxes and not general tax revenue was used to fund the trust fund. They though this approach might, by increasing deficits, reduce support for Social Security.

My view is that no one cares about the deficit anymore. Trump increased the deficit during a prosperous economy and the new stimulus bill is 50 percent of the budget without meaningful offsets.

My concern is that small companies will be unable to simultaneously pay back payroll taxes and new tax on ongoing payrolls. The double payments after the payroll tax ends will bankrupt some companies and slow the economy.

Should the Treasury reimburse the Trust funds for revenue lost from the payroll tax or should the government require companies make extra payments in the future to make up for this lost revenue?

My vote is that the Treasury should use general tax revenue to shore up the Social Security system both now in this emergency and in an ongoing basis. Hard for Republican budget hawks to argue for cuts to Social Security when every single one of them voted for Trump’s corporate tax cuts in relatively prosperous times.

Put your vote in the comment section of Policy & Politics.