Next stimulus: What is a payroll tax cut and how much money would it mean to you?

Donald Trump pushes for payroll tax cut

At a press conference in the Rose Garden on Friday, President Donald Trump said he would like to see a payroll tax cut to help the American economy to continue to recover from the shutdown caused by the COVID-19 virus.

Trump, who had called the press conference to tout the unexpectedly good jobs numbers released Friday morning, said his administration would be pushing for Congress to include a payroll tax cut in any stimulus package that may come in the summer.

“We’ll be going for a payroll tax cut,” Trump said. “We’ll be asking for additional stimulus money because once we get this going it will be far bigger and far better than we’ve ever seen in this country.”

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What is a payroll tax cut and what is it used for?

A payroll tax is money taken out of each paycheck that you earn. That money goes to the federal government to fund the Social Security and Medicare programs.

How much is the payroll tax?

Every payday, 7.65% of your wages are taken from your paycheck. Your employer also pays 7.65%. The Social Security program gets 6.2%, and Medicare gets 1.45%.

Who has to pay it?

The payroll tax is levied on the first $137,700 of earnings. If you make more than $200,000 a year, an additional 0.9% Medicare tax is also collected.

How much money would be coming to you?

Say you make $15 an hour. If you work a 40-hour week, that would mean you would have an extra $45.90 a week, or $183.60 a month in your paycheck.

How long would it last?

The president did not say Friday how long he would like the payroll cut to last. Last month, he suggested it could be in place until November or perhaps December

Are Democrats for the cut?

Democrats have criticized the idea, saying people who are unemployed would not see any benefit from the cut.

In addition, some have suggested that Social Security and Medicare cannot afford to lose funding for several months.

Sen. Ron Wyden, D-Oregon, the senior Democrat on the Finance Committee, said in March that Trump’s payroll tax proposal is a “huge mistake” that would “amount to hundreds of billions of dollars in tax cuts for big corporations.”

“What they want to do is hit Social Security like a wrecking ball with a massive tax cut for the country’s biggest corporations,” Wyden added. “We are going to oppose this with everything we have.”

Len Burman, a professor at Syracuse University, told CNBC a payroll tax break is a “terrible idea.”

“The main problem with the proposal is that it would go to the people who least need help,” Burman said. “It seems like you’re deliberately targeting it to people who are in the best situation … the ones who are still working.”

WASHINGTON, DC - JUNE 05: U.S. President Donald Trump speaks during a news conference in the Rose Garden at the White House June 05, 2020 in Washington, DC. In the midst of nationwide protests against the death of George Floyd, the U.S. Labor Department announced the unemployment rate fell to 13.3 percent in May, a surprising improvement in the nation’s job market as hiring rebounded faster than economists expected in the wake of the novel coronavirus pandemic.
WASHINGTON, DC - JUNE 05: U.S. President Donald Trump speaks during a news conference in the Rose Garden at the White House June 05, 2020 in Washington, DC. In the midst of nationwide protests against the death of George Floyd, the U.S. Labor Department announced the unemployment rate fell to 13.3 percent in May, a surprising improvement in the nation’s job market as hiring rebounded faster than economists expected in the wake of the novel coronavirus pandemic. (Photo by Chip Somodevilla/Getty Images/Getty Images)