Payroll tax cut would be better than a rate cut – but still wouldn’t stop economic fallout
March 10, 2020, 3:14 PM CDT
By Martha C. White
President Trump is still meeting with economic experts and Congress and recommending a payroll tax cut, either temporary or permanent, to help alleviate the coronavirus economic effects. Though many predict that the payroll tax cut would do more to help than an interest rate cut, some experts don’t believe that it will help that much.
This article interviews experts and many are more concerned about the strong labor market and the risk that the hiring will reverse, and layoffs will be forthcoming. A shrinking labor market would partially offset savings in payroll tax cuts, as the unemployed aren’t paying taxes.
Another concern is that cutting payroll taxes isn’t going to help the low wage employees much. Some of the most negatively impacted wage earners are in the hospitality and travel industries. Those are two of the worst-hit industries by the coronavirus.
The article quotes one expert as saying that an employee with a $30,000 income would only have a positive impact of around $50 each month. This, in the opinion of many, isn’t going to have enough of an effect to overcome the coronavirus effects.
Read the article here for more information.