This is the Second Stimulus Update for August 8 – Trump’s Executive OrderGo directly to UPDATE: Impact of Payroll Tax Cut on Social Security and Medicare
(UPDATED SEPT 4) Go Directly to: UPDAGE: IMPACT OF PAYROLL TAX CUT ON SOCIAL SECURITY AND MEDICARE, AND OTHER ISSUES
As you know, our lawmakers have been in heated debate over this second stimulus package. No agreements have been made.
Trump had previously promised to step in if Republicans and Democrats didn’t bypass their differences and come to an agreement. That time has come.
On Saturday, August 8th, after the House and the Senate had failed to come to terms on the second stimulus package, President Donald Trump stepped up and signed the executive orders to provide relief to the American people. His intent was to save American jobs, save renters and homeowners, provide relief to hard-working employees and students.
Trump’s Executive Order:
- Payroll tax break to Americans earning less than 100k/year
- This allows employees to take home bigger paychecks
- Takes effect August 1st, and continuing through the end of 2020
- He plans to make this cut permanent if he’s reelected in November
- An order for Department of Housing and Urban Development, HHS and CDC
- This order protects people from eviction
- Expanded unemployment benefits
- Provides an additional $400/week to unemployed
- States will be asked to cover 25% – using existing funding
- Student loan relief
- This will extend the 0% interest rates and suspended payments through the end of the year
- Will likely continue after that
Those are the four executive orders Trump signed into law on Saturday. Next, he said the White House will be looking into additional tax relief such as income tax cuts for middle and lower income households, and capital gains cuts for the purpose of creating jobs.
***NOTE: Many are concerned about the effect the payroll tax cuts have on social security and medicare, and what it actually means for employees. We’re looking into it, checking our facts, and will bring you a factual and accurate update on it. Look for that email in your inbox.
More Details from Trump:
I must say something about this presidency, though I know many will unfollow us after I say it – and I’m okay with that. In fact, I’d rather weed those people out now. I’m only interested in people who choose to recognize the truth. So, here it is…
I wasn’t necessarily a Trump supporter before he came into office, and I don’t generally like to engage in political discussions or debates. But I am quite impressed with the way our president has handled this entire covid crisis.
Even in the face of so much political adversity, and while facing reelection, he’s made the difficult and unpopular decisions.
Say what you will about Trump, but it cannot be denied that he’s a man of action. He gets things done. And his aim seems to be to take care of the American people. That’s the kind of person I would follow in a crisis. I can only imagine what this country would look like if the other candidate had won. No, I don’t want to imagine that.
I don’t know what Trump like personally. And unless I’m faced with the opportunity to meet him, I don’t care. I’m impressed with his work ethic and decisiveness and all that he’s accomplished. I am grateful we have someone like Trump in office during such a state of emergency. He will be the reason we don’t crash.
UPDATED AUG 10 2020
Impact of Payroll Tax Cut on Social Security and Medicare
As noted above, many people are up in arms about the payroll tax cut, and understandably so. However, this fear seems unnecessarily fueled by the media.
The objections and concerns are as follows:
- As it is a payroll tax cut, this does not benefit the unemployed
- Social Security and Medicare will not be funded
1) Payroll Tax Cut and the Unemployed Answered
The unemployed will continue to benefit from the continuance of additional $400 in unemployment benefits. Yes, this is a cut from the $600, but it is more than the $0 they would be getting if Trump hadn’t stepped in. Remember, the $600 additional benefits expired at the end of July. The executive order makes this effective August 1.
It’s important to note that the payroll tax cut benefits the middle and lower income tax brackets. According to ssa.gov “Social Security is financed through a dedicated payroll tax. Employers and employees each pay 6.2 percent of wages up to the taxable maximum of $137,700 (in 2020), while the self-employed pay 12.4 percent.”
2) Answered: Social Security and Medicare will be Funded
Many fear social security and medicare will not be funded if the tax is cut. We have researched and discovered that Trump has already thought of this. Social Security and Medicare will be funded by the general fund, as it has been done in the past when this tax has been temporarily cut.
“There will be an automatic contribution from the general fund to those trust funds,” said Mnuchin in an interview. “There’ll be no reduction to the [social security and medicare] benefits.”
So, this will be done just as it has been done in the past…
In 2011 and 2012, Congress and President Obama cut payroll taxes by 2 percentage points. Social Security was not harmed because Congress funded the program with the general revenue. See the Social Security Legislative Bulletin, published by ssa.gov. The verification is in the second bullet point. Here it is for your convenience (or you can click the link above and verify the source):
Below, is the interview with Mnuchin
***BUT BEFORE YOU DISCREDIT THE SOURCE…
…because it is Fox News, usually associated with the one side of the political spectrum…
I don’t know which side of the political divide you sit on, but I want to point out that, even if this isn’t your political affiliation, you can still find useful information in this video as well as any other including CNN for example, who tends to favor the other end. You just have know how to discern the truth from the programming.
Here, we want to hear it directly from the horse’s mouth. In this case, it’s Steven Mnuchin, who’s directly involved in the executive order.
Beware of interviews in which the reporter’s voiceover covers the interviewee’s answers. When they do this, you’re getting incomplete information, so when you go on Twitter to complain about it, you kind of look like an ass because you only have part of the story. I mean “you” generally. I don’t mean you. I don’t even know if you’re on Twitter. But basically, you’re only getting what the reporter wants you to know, which I would call programming.
Whatever political side you’re on, it doesn’t matter. Only take what’s said directly from the source. And even then, you have to use your internal discernment. If that’s not enough, the actual document, for instance, would be a better reference of fact.
Here’s what Mnuchin says about the payroll tax cut (or suspension) and its impact on social security and medicare:
To really drive this idea home, I’d like to invite you look at news channels in a different way. Instead of automatically turning on your favorite channel because it tends to align with your belief, try just researching the interview. Find an outlet who covers the interview in full.
You might have to watch various media channels or sites to find those that will allow the original source to speak. If you want to know the truth – if you’re willing to look at the truth whether it agrees with your worldview or not – again look for an interview where the one interviewed is allowed to speak in full, and is not cut off in the middle of his or her message.
You could also go to the official site, a .gov site for example, and read the policy itself or an official statement.
In today’s case, the news outlet happens to be Fox News. We simply cannot deny what Mnuchin says because we are seeing it with our own eyes and hearing it with our own ears.
Before you write us off as biased, you’ll find many of our posts link to a variety of news outlets, including CNN, Washington Post, NYTimes, and others. We seek out the truth. We don’t care where we find it.
Other Executive Order Issues and Things to Note
We’re going to get a little political here. The reason for this is because politics is exactly what the issue is.
Compromising on the Second Stimulus Package:
We’re going to get into Democrats vs Republicans a little bit. This is not to take sides or say one is better than the other. We believe people on both sides are doing what they think is right. Here we simply want to lay out the issue.
Previously, Republicans wanted to pass the bill on the items they and the Democrats could agree on. But the Democrats were adamant about not passing the bill piece by piece.
As Mnuchin stated in the interview above, “Let’s pass legislation on things that we agree on. Let’s not hold up money for education for kids getting back to school safely. Let’s not hold up money to state and local governments where they need it.”
It seems the Executive Order has solved this conflict because the Democrats now want to negotiate. I’m not saying the Democrats were the only issue. But in this case it was them who held up the critical items in the bill. This is not an opinion, but verifiable fact.
**NOTE – A fact is something that can be verified.
Now the Democrats and Republicans are interested in compromising on the size of the bill.
The Legality of the Executive Orders:
These executive orders will likely not be challenged in court. The reason for this is political.
If the Democrats challenge them, it will make them “look like the bad guys.”
Usually politics get in the way of progress but in this instance, it seems to be helping. Politically, this makes Trump look like a hero. Especially if the Democrats don’t challenge him. So, they’re left with one option, and that is to cooperate on the bill.
Surprise Bill at the End of Payroll Tax:
The payroll tax cut is temporary. Opposition argues that this will be a big surprise bill at the end. But Trump has already assured that if he’s reelected, the American people will not have to pay this back. Obviously, if he’s not reelected, he wouldn’t be able to make that promise.
What the payroll tax holiday does is create a wage increase for workers and provides incentive to get people back to work.
Extended Unemployment Benefits:
The executive order has the states covering 25% of the extended unemployment benefits, or $100 of the $400. Many say that states do not have the funds for this because they have other things to pay for, as Chuck Schumer has said. His example given is the Hurricane trust fund during Hurricane season.
The rebuttal is that state and local governments still have leftover money from the previous stimulus package. This is just the argument. We have not verified the accuracy of this statement.
Get more details in this ClearValue Tax video:
(Updated Sept 4, 2020)
The payroll tax cut is not actually a cut, but a deferral, which means you will be billed more next year to make up for it.
You have the option to opt out of the payroll tax deduction. Your employer should give you the option to opt out of this deferral. If you haven’t received it yet. The majority of employers are expected not to participate in this deferral. If you haven’t been informed, ask your employer.
Federal employees do not have the option to opt out of the deferral.
Not all the rules regarding this deferral have been written yet.
Latest News on the Second Stimulus Package
As of today, there is still no agreement on the second stimulus package. There has been phone negotiations, but both sides seem to be holding firm to their sides. The Senate gets back into session in five days.
Get more details from ClearValue Tax: