As Trump pushes tax cuts for coronavirus stimulus, lawmakers push back
May 6, 2020 The Fiscal Times
resident Trump’s renewed push for a payroll tax cut as part of the next round of coronavirus stimulus is being met with bipartisan resistance on Capitol Hill, with even some Republican leaders questioning how effective the policy would be. As lawmakers debate the shape of the legislation, Trump’s push for a payroll tax cut likely presages a broader fight over the most appropriate next steps to mitigate the damage from the coronavirus recession and encourage a speedier recovery.
Setting up a clash: As lawmakers debate the next package to address the pandemic, Trump on Sunday drew a line in the sand: “We are not doing anything unless we get a payroll tax cut,” he said. Congress in March deferred employers’ portion of the payroll tax, but Trump reportedly is “passionate” about a payroll tax cut, which advocates argue will give workers ability to spend and businesses more incentive to hire.
House Speaker Nancy Pelosi quickly downplayed the payroll tax cut idea. “Nobody’s putting anything on the table and saying, ‘Unless we have this, we’re not doing that.’ He shouldn’t either,” she told CNN on Monday.
But while some Republicans have come out in favor of a payroll tax cut, or said they’re at least open to the idea, some key Senate Republicans have voiced significant reservations. “I’m not a particular fan of that,” said Senate Majority Whip John Thune (R-S.D.), the Senate’s No. 2 Republican, adding that a payroll tax cut only helps workers still on payrolls. “I guess I’m open to being persuaded that it is something that could be effective, but I think some of the things that we’re currently doing are having a bigger impact,” he said, according to The Hill.
Asked what he thought of a payroll tax cut, Sen. Chuck Grassley, the Republican chair of the Senate Finance Committee, said: “Right now, not much,” Politico reports. Sens. John Barrasso of Wyoming, Roy Blunt of Missouri and Susan Collins of Maine were among the other Republicans who expressed skepticism about a payroll tax cut this week.
And, of course, Senate Majority Leader Mitch McConnell made it clear this week that shielding businesses from coronavirus lawsuits is his top priority. “I think I can safely say for our team here, the Republican Senate majority, if there’s any red line it’s on litigation,” McConnell said when asked about a payroll tax cut.
Eyeing other tax cuts, too: The president and administration officials have also discussed and publicly floated some other tax cut ideas. As Jim Tankersley of The New York Times reports:
“Mr. Trump’s advisers are considering several measures that so-called supply-side conservatives have long proposed as a means to accelerate economic growth. In many cases, those measures would expand or make permanent provisions of the sweeping tax overhaul Mr. Trump signed into law in 2017. They include making permanent a provision that allows businesses to immediately deduct the full cost of their investments in equipment and other relatively short-lived assets, which is currently set to begin phasing out in 2022.
“In some cases, the proposals would reverse provisions tucked into the 2017 overhaul to help pay for the overall package, such as limiting deductions on research and development investments in 2022.”
Trump on Tuesday tweeted about a cut in the capital gains tax and allowing business spending on meals and entertainment to be deducted:
“Well run States should not be bailing out poorly run States, using CoronaVirus as the excuse! The elimination of Sanctuary Cities, Payroll Taxes, and perhaps Capital Gains Taxes, must be put on the table. Also lawsuit indemnification & business deductions for restaurants & ent.”
Those proposals come as Republicans increasingly question the need for additional spending measures to counteract the coronavirus recession. “‘No more spending’ has really become the rallying cry of the right,” Stephen Moore, an informal adviser to the president, told the Times, adding that the spending done so far didn’t work. “[N]ow we need to try something else,” he said. “There is going to be civil war in Congress over this.”
Are tax cuts the answer? Democrats aren’t likely to support the tax proposals being developed by the administration. “It’s extraordinarily naïve to think that tax cuts are going to bring this economy back faster,” Democratic Rep. Don Beyer of Virginia told the Times. “I have not talked to a single economist yet who says tax cuts are a viable solution here.”
Economic analysts on the left have similarly slammed Trump’s list of policy proposals. “If you are one of the 30 million people who lost their job last month, you should know that not a single one of these proposals would help you at all. Not one,” Michael Linden, executive director of the Groundwork Collaborative and a fellow at the Roosevelt Institute, wrote in response to Trump’s tweet.
Beyer and two Democratic senators, Michael Bennet of Colorado and Jack Reed of Rhode Island, released a plan Tuesday that calls for extending enhanced unemployment benefits and tying them to economic and labor market conditions. “Passing emergency relief legislation that incorporates automatic triggers would have the enormous benefit of ensuring assistance continues to flow to workers even if Congress itself is unable or unwilling to act,” Beyer said in a statement.
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