LAFAYETTE, La. (KLFY) – As we enter May, a select group of people are still waiting to receive their stimulus payment, but is $1,200 enough to get people through the pandemic? Congress is now milling over a second round of stimulus payments, while President Donald Trump wants payroll tax cuts to be a part of the relief package.
“I told Steve just today, we’re not doing anything unless we get a payroll tax cut,” Trump said during a Fox News town hall on May 3, referring to Treasury Secretary Steve Mnuchin. “That is so important to the success of our country.”
What exactly are “payroll tax cuts” and how does it affect the American worker?
Payroll taxes include:
- Social Security, which takes out 6.2% of your income up to $132,900,
- and Medicare, which takes out 1.45% of your income. (Married couples filing jointly who make $250,000 or more, and people who make over $200,000, pay an additional 0.9%.)
Employers also pay payroll taxes:
- They pay 6.2% of your income, so the government gets 12.4% of your total income, and they pay 1.45% of your income toward Medicare as well.
If Social Security and Medicare taxes aren’t taken out of paychecks, American workers and businesses would take home a more money with every paycheck.
The idea behind the payroll tax cut is that workers would spend more money and essentially curb a recession. Business owners would also retain more money, which may reduce future lay-offs.
Those opposed to a payroll tax cut say it would do nothing to help those who are unemployed due to the pandemic, like restaurant workers and those in the hospitality and tourism industry.
Roughly 30 million Americans have filed for unemployment benefits in the last six weeks. The Labor Department will release its latest measure of the national unemployment rate on Friday.