Alexander's Column

For Real COVID-19 Relief, Suspend the Payroll Tax

"We need to directly help American workers and families [and] put money directly and quickly into [their] hands."

Mark Alexander · Mar. 18, 2020
“Taxes should be continued by annual or biennial reenactments, because a constant hold, by the nation, of the strings of the public purse is a salutary restraint from which an honest government ought not wish, nor a corrupt one to be permitted, to be free.” —Thomas Jefferson (1813)

It’s a race to raid the national treasury, and the winner is…

The primary beneficiaries of proposed measures to prop up the economy in the wake of the COVID-19 epidemic devastation should be America’s working men and women, whose jobs and income stability are threatened by the extreme measures to slow the Chinese CV19 infection rate.

It’s no small irony the communist Chinese will also be beneficiaries, as they float a lot of U.S. debt, including the debt necessary to fund the economic props.

The House Democrats’ so-called Families First Coronavirus Response Act was delivered to the Republican Senate for expected affirmation. It had been stalled in negotiations, as House Speaker Nancy Pelosi (D-CA) tried to attach allocations to the $105 billion bill for expenditures that have nothing to do with COVID-19 relief. That graft initially prompted 40 Republicans to vote against the bill.

Continuing her shamelessly partisan shots at President Donald Trump and Republicans, Pelosi insisted, “During negotiations, the Democratic House will continue to make clear to the administration that any emergency response package must put families first before any aid to corporate America is considered.” Because, you know, Democrats want you to believe that they put families first.

Meanwhile, Senate Majority Leader Mitch McConnell (R-KY) is keeping Minority Leader Chuck Schumer (D-NY) and his $750 billion bill sidelined as McConnell rallies his troops behind an almost $1 trillion Trump administration proposal.

Schumer insisted, “We will need big, bold, urgent federal action to deal with this crisis.” But it won’t be his action.

McConnell declared: “We need to directly help American workers and families face this uncertain period, and particularly we’re examining policy tools to put money directly and quickly into the hands of American families. We also need to … help American small businesses survive this disruption and thrive on the other side of it. In particular, we are preparing bold steps to ensure that Main Street can access liquidity and credit during this extraordinary time.”

Treasury Secretary Steven Mnuchin said of the administration’s proposal: “It is a big number. We’ve put a proposal on the table that would inject a trillion dollars into the economy.”

Yes, it’s a “big number,” a number much larger than the $787 billion stimulus package doled out after the 2008 financial crisis. But the circumstances are very different, and so are the beneficiaries.

With this bill, as with the Democrats’ 2009 stimulus, the objective is to restore confidence in the economy. The 2009 package largely failed, however, because it focused on giveaways to Democrat special interests (remember all those “shovel-ready jobs”?) rather than to the American middle class and the small businesses that drive our nation’s economy.

In fact, it took the election of Donald Trump in 2016 to really restore confidence in the economy. And, for the record, as I mentioned in my analysis on social distancing this week, Trump has more business experience than any president in a century. While there are no “good options” for dealing with this epidemic, some options are better than others, and this president and his administration understand this as well as any president in my lifetime.

But I also questioned, “Are we going to flatten the infectious-spread curve so long that we flatline the economy?” The administration’s proposal is an effort to re-inflate consumer and business confidence, as well as economic optimism.

So, to recap … financing a government-mandated economic shutdown is expensive.

First, on 6 March, President Trump signed the $8.3 billion congressional bill providing urgent funding for vaccine development and state- and local-government prevention efforts — and a few other things.

Second, on 13 March, Trump declared a National Emergency to accelerate response and recovery.

Third, as noted above, the Senate will take up the $105 billion House bill now that most of the Democrats’ graft has been removed.

And fourth, Senate negotiations will also move forward on the massive spending package proposed by the Trump administration as the preferred alternative to the Senate Democrats’ $750 billion proposal. The administration initially said its proposal would be $850 billion — but that’s “The Art of the Deal.”

The Trump administration’s fiscal plan includes enormous financial relief to certain industries hit hardest by the shutdown — which, by extension, is relief to American workers and their families. Unfortunately, Democrats will never connect the two.

Notably, it includes about $500 billion in direct payments of more than $1,000 to most American adults.

“We want to make sure Americans get money in their pockets quickly and small-business owners have access to funds,” Secretary Mnuchin said, adding, “We’re looking at sending checks to Americans immediately … in the next two weeks.”

That would be some version of Sen. Mitt Romney’s version of former Demo presidential contender Andrew Yang’s version of direct payments to individuals.

However, in addition to the proposed direct payment relief measures (particularly for those who have lost their jobs), the most sensible way to sustain increased income for working men and women in the coming months, is Trump’s proposal to suspend the payroll tax through the end of this year. The administration is angling for some mix of payroll-tax rollback and direct distribution. The president has called for a 0% payroll tax for the next nine months, which would immediately increase take-home pay for tens of millions of American breadwinners.

White House legislative-affairs director Eric Ueland said, “The president believes very strongly in his payroll-tax-cut idea and has made it crystal clear more than once his interest in seeing action on the payroll-tax cut from Congress this year. However, there are also many other good ideas that members of Congress have.”

The payroll tax is imposed on employees and businesses (which is to say, on employees), ostensibly to fund Social Security, Medicare, and other government programs — all of which are actually “funded” by treasury IOUs to be repaid by future generations. The PT rate has increased from 4% in 1955 to 15.3% today, almost 400% — now maxing out at $7,960 for a single-earner family. Today, more than 70% of Americans pay more in payroll taxes than income taxes.

If Trump’s proposed payroll-tax suspension were fully implemented, it would amount to an $800 billion tax cut between now and January 2021. That’s about 5% of gross domestic product, and it would inject every dime back into the economy.

But a payroll-tax suspension is political kryptonite for Democrats, because the last thing they want their constituents to know is what their paychecks would look like without government taking that big cut right off the top.

Nonetheless, Democrats know the kryptonite option is better than the option of suspending income-tax withholding — which they know the administration would propose if they balk on the payroll suspension.

The withholding tax was an emergency World War II measure implemented as the Current Tax Payment Act of 1943. But it never went away. If it were now suspended and the American people actually had to set aside or scrape together the funds necessary to make the annual April tax-filing deadline, they would then become acutely aware of the cost of government. And Democrats want to avoid that scrutiny at all costs.

One caveat with the direct payments: Republicans need to exercise caution so they don’t reseed renewed calls from leftist Democrats for the ultimate socialist redistribution scheme — Universal Basic Income.

Let the political shenanigans continue.

And finally, a personal note of reflection and encouragement… As I was contemplating the Millennial resistance to not congregate in bars and on beaches, I received this message from my youngest son, whose college just shut down. He is reminding his friends, who are missing the end of their senior year, that when his grandfather was a 21-year-old senior at Dartmouth College, his entire class left for WWII, and many did not return. They were, indeed, The Greatest Generation.

This is a good time to reflect on what we value and what actually has value, and to rededicate ourselves to Keep America Great!

(Visit our comprehensive China Virus Pandemic response and recovery page, and see our related pages.

Semper Vigilans Fortis Paratus et Fidelis
Pro Deo et Libertate — 1776


Join us in prayer for our Patriots in uniform and their families — Soldiers, Sailors, Airmen, Marines, and Coast Guardsmen — standing in harm’s way, and for our nation’s First Responders. We also ask prayer for your Patriot team, that our mission would seed and encourage the Spirit of Liberty in the hearts and minds of our countrymen.

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