WASHINGTON (BRProud) — 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? As Congress mulls over a second round of stimulus payments, President Donald J. Trump wants payroll tax cuts to be a part of the relief package.
How do payroll tax cuts affect American workers?
Payroll taxes include:
- Social Security payments: 6.2% of employee paychecks, up to $132,900
- Medicare payments: 1.45% of paychecks
- People making over $200,000—or $250,000 for couples filing jointly—pay an additional 0.9%
- Employers match those payments of 6.2% and 1.45% toward Social Security and Medicare, respectively
If Social Security and Medicare taxes aren’t taken out of paychecks, American workers and businesses take home more money every pay period, while shorting funding for those vital programs for seniors.
Cutting payroll taxes could encourage the labor force to spend more money and curb a recession. Business owners with more money might hold off on future lay-offs.
However, these cuts do not affect tipped workers, those paid under the table, or the unemployed, a significant portion of the American workforce. Those opposed to a payroll tax cut say it would do nothing to help those who are unemployed due to the pandemic.
Roughly 30 million Americans have filed for unemployment benefits in the last six weeks—many from the restaurant, hospitality, and tourism industries. The Labor Department will release its latest measure of the national unemployment rate on Friday.