Trump payroll-tax cut push creates new headache for Republicans

President TrumpDonald John TrumpNew Bob Woodward book will include details of 25 personal letters between Trump and Kim Jong Un On The Money: Pelosi, Mnuchin talk but make no progress on ending stalemate | Trump grabs 'third rail' of politics with payroll tax pause | Trump uses racist tropes to pitch fair housing repeal to 'suburban housewife' Biden commemorates anniversary of Charlottesville 'Unite the Right' rally: 'We are in a battle for the soul of our nation' MORE is renewing his push for a payroll-tax cut to be part of the next coronavirus relief package, adding a wrinkle to forthcoming negotiations.

Trump over the past week has stressed that payroll-tax relief is one of his top legislative priorities. But lawmakers on both sides of the aisle aren’t enthusiastic about the idea, while many economists argue it might not be an effective way to provide relief to U.S. households during the coronavirus pandemic.

During remarks in the Oval Office on Monday, Trump said a payroll-tax cut is “very important.” He also called it a win-win situation for workers and employers.

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“It’s a big saving for the people,” he said. “It’s a tremendous saving, and I think it’s an incentive for companies to hire their workers back and to keep their workers.”

Trump added that the tax cut is one of many elements that Congress and the administration are discussing as they start to hash out what’s expected to be the last COVID-19 relief bill before Election Day.

In an interview with Fox News that aired on Sunday, Trump told Chris WallaceChristopher (Chris) WallaceChris Wallace: Kamala Harris 'not far to the left despite what Republicans are gonna try to say' Mnuchin: Democrats will 'have a lot of explaining to do' if they want to challenge Trump orders in court Pelosi: Trump executive actions 'are illusions' MORE that he might not sign a relief package into law if it doesn’t include his desired tax cut.

“I’ll have to see, but yeah, I would consider not signing it if we don’t have a payroll-tax cut,” Trump said.

Discussions about the next coronavirus relief bill are expected to ramp up this week, as lawmakers return to Washington following a two-week July 4 recess.

Treasury Secretary Steven MnuchinSteven Terner MnuchinOn The Money: Pelosi, Mnuchin talk but make no progress on ending stalemate | Trump grabs 'third rail' of politics with payroll tax pause | Trump uses racist tropes to pitch fair housing repeal to 'suburban housewife' US Chamber asks Treasury to clear up 'serious concerns' about payroll tax deferral Pelosi, Mnuchin talk but make no progress on ending stalemate MORE and White House chief of staff Mark MeadowsMark Randall MeadowsPelosi, Mnuchin talk but make no progress on ending stalemate Overnight Health Care: Democrats say White House isn't budging in coronavirus relief stalemate | Top Fed official says quick reopenings damaged recovery from coronavirus | Nearly three dozen health experts object to HHS coronavirus database Democrats say White House isn't budging in coronavirus relief stalemate MORE plan to meet with Senate Republicans on Tuesday to discuss their plan.

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Senate Majority Leader Mitch McConnellAddison (Mitch) Mitchell McConnellOn The Money: Pelosi, Mnuchin talk but make no progress on ending stalemate | Trump grabs 'third rail' of politics with payroll tax pause | Trump uses racist tropes to pitch fair housing repeal to 'suburban housewife' Pelosi, Mnuchin talk but make no progress on ending stalemate Democrats say White House isn't budging in coronavirus relief stalemate MORE (R-Ky.) said Monday afternoon that GOP senators “will be putting forward a strong starting point for additional recovery legislation hopefully as soon as this week.”

Lawmakers and the administration are under pressure to act quickly. Enhanced unemployment benefits are set to expire at the end of the month, and legislating will become almost exponentially harder as November’s elections draw near.

Trump has been pushing for a payroll-tax cut throughout the pandemic, but has fallen short in each previous relief package.

A $2.2 trillion coronavirus relief law that Trump enacted on March 27 included payroll-tax relief for employers, but not for employees. That law allows employers to defer paying their share of the Social Security payroll tax, and it creates a refundable payroll-tax credit for certain wages businesses pay their employees.

Employees and employers each pay Social Security payroll taxes of 6.2 percent of wages and pay Medicare payroll taxes of 1.45 percent.

With lawmakers and the administration turning their attention to an additional coronavirus relief measure, Trump is reemphasizing a payroll-tax cut, including for employees.

But the idea still faces criticism from some top GOP lawmakers, including Senate Finance Committee Chairman Chuck GrassleyCharles (Chuck) Ernest GrassleyThe Hill's Morning Report - Presented by Facebook - The choice: Biden-Harris vs. Trump-Pence Trump grabs 'third rail' of politics with payroll tax pause On The Money: McConnell says it's time to restart coronavirus talks | New report finds majority of Americans support merger moratorium | Corporate bankruptcies on pace for 10-year high MORE (Iowa), who said Monday a payroll-tax cut would create “a public relations problem” because it would be perceived as harming the Social Security trust fund.

Sen. John CornynJohn CornynEnough legal games — we need to unleash American energy Three pros and three cons to Biden picking Harris The Hill's 12:30 Report - Speculation over Biden's running mate announcement MORE (R-Texas), an adviser to McConnell, warned that a payroll-tax cut would be “problematic.”

“I think it’s problematic, because obviously the trust funds for Social Security and Medicare are already on their way to insolvency,” Cornyn said. “I’m not a fan.”

Additionally, any coronavirus package will need bipartisan support to become law, and Democrats continue to be opposed to the payroll-tax cut idea. They point out that such a move would not provide relief for the millions of Americans who are unemployed.

“A payroll tax cut doesn’t help those who aren’t on a payroll,” Sen. Kamala HarrisKamala HarrisCandidates on Biden's VP list were asked what they thought Trump would nickname them as part of process: report Bass on filling Harris's Senate spot: 'I'll keep all my options open' Election security advocates see strong ally in Harris MORE (D-Calif.) tweeted Monday.

Trump’s push has the backing of some Republican lawmakers, as well as well-known conservatives such as Stephen MooreStephen MooreSunday shows - Trump coronavirus executive orders reverberate Moore expresses cautious optimism for 'v-shaped' recovery following jobs report Trump embraces jobs report signaling slowdown MORE, who advised the president’s 2016 campaign. They argue that it would help to encourage people to return to work.

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In an encouraging sign for Trump, House Minority Leader Kevin McCarthyKevin Owen McCarthyWin by QAnon believer creates new headaches for House GOP GOP leaders go into attack mode against Harris Republicans introduce bill to defend universities conducting coronavirus research against hackers MORE (R-Calif.) told reporters on Monday that a payroll-tax cut would be a part of Republicans’ proposal.

Moore said he thinks Republicans are “really rallying around this idea.”

However, a number of economic policy experts across the ideological spectrum argue that a payroll-tax cut would not be the best way to help people in need.

“There’s much more effective things that can and should be done,” said Kris Cox, a senior tax policy analyst at the left-leaning Center on Budget and Policy Priorities. She said better options include enhanced unemployment insurance, expanding the Supplemental Nutrition Assistance Program and providing fiscal relief to states.

Douglas Holtz-Eakin, president of the right-leaning American Action Forum, said a payroll tax holiday through the end of the year wouldn’t do much to increase hiring because hiring is a longer-term decision.

Kyle Pomerleau, a resident fellow at the right-leaning American Enterprise Institute, said a payroll tax cut would “undermine the Social Security trust fund and the Medicare trust fund.” He noted that the federal government can transfer money from the general fund to the trust funds but said that such a move is bad fiscal policy because “it breaks the link between the tax and the benefit.”

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Since the passage of his 2017 tax-cut law, Trump has been interested in passing additional tax cuts. The 2017 law didn’t win over most voters, and the president is now stepping up his economic attacks on presumptive Democratic presidential nominee Joe BidenJoe BidenRon Johnson signals some GOP senators concerned about his Obama-era probes On The Money: Pelosi, Mnuchin talk but make no progress on ending stalemate | Trump grabs 'third rail' of politics with payroll tax pause | Trump uses racist tropes to pitch fair housing repeal to 'suburban housewife' Biden commemorates anniversary of Charlottesville 'Unite the Right' rally: 'We are in a battle for the soul of our nation' MORE.

When asked about Trump’s plans for further tax cuts in a press call last week hosted by the president’s campaign, Vice President Pence mentioned the president’s interest in a payroll-tax cut.

“A payroll-tax cut would put money in the pockets of working Americans,” Pence said.

Whether a payroll-tax cut is included in the next package may depend on a number of factors, including how other contentious issues are resolved.

Marc Gerson, a former congressional tax aide who now leads the government affairs practice at Miller & Chevalier, said the amount of tax relief in the bill may depend on the overall size of the package and how the measure deals with other issues, such as unemployment insurance, aid to state and local governments and liability protection for businesses.

“A payroll-tax cut, even if it’s only on the employee side, could potentially be extremely expensive,” he said.

Juliegrace Brufke and Jordain Carney contributed.