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Top Republican offers bill to create payroll tax holiday

Top Republican offers bill to create payroll tax holiday
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Rep. Kevin BradyKevin Patrick BradyOn The Money: Biden, Democratic leaders push for lame-duck coronavirus deal | Business groups shudder at Sanders as Labor secretary | Congress could pass retirement bill as soon as this year Top Democrat: Congress could pass retirement bill as soon as this year Momentum grows for bipartisan retirement bill in divided Congress MORE (Texas), the top Republican on the House Ways and Means Committee, introduced legislation on Friday that would create a payroll tax holiday from Sept. 1 through Dec. 31, an effort aimed at forgiving the taxes deferred under a memo President TrumpDonald John TrumpBiden to nominate Linda Thomas-Greenfield for UN ambassador: reports Scranton dedicates 'Joe Biden Way' to honor president-elect Kasich: Republicans 'either in complete lockstep' or 'afraid' of Trump MORE signed last month.

The bill would reduce the 6.2 percent employee-side Social Security tax to zero in the last four months of this year, and would also implement a similar tax cut for self-employed people.

To prevent the holiday from hurting the Social Security trust fund, the bill would make transfers to the fund from the general fund.

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Trump signed a memo that resulted in the IRS issuing guidance late last month under which employers can stop withholding Social Security payroll taxes from workers' paychecks from Sept. 1 through Dec. 31. The employers currently have to recoup the deferred taxes by increasing the amount held from workers' paychecks in the first four months of next year.

The payroll tax deferral is optional, and many businesses are not planning to implement it because absent congressional action, workers could see smaller paychecks at the beginning of 2021.

Brady said that his bill would help provide certainty to businesses and local economies.

“The essential workers who keep this country running through the pandemic deserve a pay raise," he said in a statement. "This bill forgives the payroll taxes deferred by President Trump to help working families, many of whom now rely on a single paycheck."

The payroll tax holiday in Brady's bill would apply to all workers, not just those whose taxes are currently being deferred.

The Joint Committee on Taxation (JCT) said in a memo that under current IRS procedures, employers would file amended returns to the IRS for periods when they over-withheld payroll taxes. Workers who don't get refunds from their employers could get them when they file their 2020 tax return next year.

JCT estimated that the bill would result in a revenue loss of $137 billion.