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The House, red states, large employers rejecting Trump payroll-tax holiday

  • The US House became the latest employer to spurn Trump’s payroll-tax holiday, which is now in effect until December 31.
  • The lower chamber joins several large companies and at least two red states in rebuffing the directive, citing difficulties around carrying out the deferral and the prospect of getting stuck with large tax bills.
  • “The fact that few employers would take this up was totally foreseeable — the scheme just didn’t work,” tax expert Seth Hanlon told Business Insider.
  • Trump said he would forgive payroll taxes if he is re-elected, but that requires Congress to act.
  • Visit Business Insider’s homepage for more stories.

The House of Representatives on Friday became the latest employer to reject President Donald Trump’s payroll-tax deferral for its employees.

It joins several large companies and some red states that have already spurned the measure. The sparse involvement from employers threatens to inflict a heavy blow on a measure the Trump administration touted as an effective way to get money to households and boost spending.

In an email to employees, the House’s Chief Administrative Officer Philip Kiko said the lower chamber “determined that implementing the deferral would not be in the best interests of the House or our employees.”

It continued: “As a result, we will not implement the payroll tax deferral.”

Rep. Kevin Brady, a top Republican on the House Ways and Means Committee, announced on Thursday he was deferring the tax for some of his staff, according to the Wall Street Journal’s Richard Rubin. Brady’s office did not immediately respond to a request for comment.

“The fact that few employers would take this up was totally foreseeable”

Last month, Trump signed an executive order to implement a payroll-tax holiday through December 31. Employees earning under $4,000 every two weeks — or below $104,000 yearly — won’t have to pay the 6.2% tax out of their paychecks, which is used to fund Social Security.

Employers can choose whether they want to defer the tax payment. But its not waived since it requires Congress to step in.

Trump’s directive has triggered significant criticism from business groups and tax experts. Several large employers have rebuffed taking part in the holiday, such as CVS Health, United Parcel Service, Home Depot, and JP Morgan Chase, The Wall Street Journal reported.

“It’s needless complication for virtually no benefit for employees and a lot of risk on employers,” Seth Hanlon, a senior fellow at the left-leaning Center for American progress, told Business Insider. “The fact that few employers would take this up was totally foreseeable — the scheme just didn’t work.”

At least two states with Republican governors — Indiana and Arizona — have opted out of the plan, per The Washington Post. So far, the federal government is implementing the tax holiday for federal workers, active US troops, and civilian contractors within the Defense Department — none of whom can opt out.

Federal guidance says that participating employers have to recoup the money by collecting the Social Security levy twice from January to April. That step would reduce the size of workers’ paychecks, and its open to question how an employer can collect the tax from a worker that may not be on their payroll early next year.

It’s unclear whether the Senate will forgo implementing the tax holiday as the House did. A spokesperson for the Senate Secretary’s office — which administers payroll for the upper chamber’s employees — told Business Insider that Senate staff received an email on Friday saying guidelines were still being reviewed and no decision had been reached.

“Senate offices are especially a clear example of an employer that might have employees not on the payroll in the new year,” Hanlon said, pointing to campaign workers.

The president tweeted on Thursday that he would “totally forgive ALL deferred payroll taxes ” with federal tax revenue if he were elected to a second term in November.

But absolving employers of their tax obligations requires lawmakers to pass legislation. Hanlon said its unlikely given the scant tax holiday participation in the private sector, and reluctance to do so in both parties.

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