Donald Trump ordered a payroll tax holiday for all workers through the end of the year. But like all Trump directives not all is what it seems. On September 1, workers were supposed to start seeing a 7.65% bump in their paychecks. Trump had ordered that the Social Security (6.2%) and Medicare (1.45%) payroll taxes be deferred until next year. Both the employee and the employer pay the 7.65 tax equally. Instead of the payroll bump what most employees are seeing is that their paychecks aren’t getting the promised extra money.
The reason is simple. The Trump directive does not require that companies offer the payroll holiday to their employees. Instead, what the Trump directive does is make companies responsible for paying the taxes next year without any recourse to recover the money from their employees.
Few companies wanted the responsibility to ensure that their employees meet their tax obligations next year. As such, many of them elected not to offer the tax holiday.
Instead, what companies are doing is giving themselves an interest free loan until next year.
According to Bloomberg, large companies are not participating in the tax holiday. Bloomberg in an article published on September 11, reports that Costco Wholesale with abut 160,000 employees is not participating. Bloomberg adds that neither are FedEx and United Parcel Service (UPS).
Even the House of Representatives has not implemented Trump’s holiday, arguing that “implementing the deferral would not be in the best interests of the House or our employees.”
Although employees aren’t seeing the tax holiday, companies are benefiting from their own tax break. The last Coronavirus stimulus package included a provision allowing companies to postpone their share of the Social Security tax (6.2%) for the rest of the year.
For the largest employers that translates into millions.
Although the companies must still make the tax payment next year and in 2022, the tax monies they are holding until then can be used for business expenses. According to the legislation, half of the tax amount due is payable next year and the balance is due in 2022.
Companies have an interest-free loan until 2022.
According to a Politico article published yesterday, ADP has reported that 40,000 of its clients (companies) are using the company tax deferral.
Politico adds that UPS will have $370 million, Chipotle will have $100 million and Wendy’s another $89 million. Although that is just a small sampling of companies, it clearly shows that companies stand to benefit substantially from the tax break.
Over $500 million in interest-free loans just from the three companies listed above.
Donald Trump keeps making promises but continues to fall short of meeting them.
The beneficiaries of Trump’s ineptitude continues to be the large business conglomerates that are basking on the Wall Street largess that continues to hurt small businesses and workers.