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Trump’s ‘tax holiday’ has few takers in Connecticut

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Washington — It’s been two weeks since President Donald Trump offered employers a way to temporarily fatten their workers' paychecks, but in Connecticut there have been few takers.

Using his executive authority, Trump has allowed the nation’s employers to defer the payment of certain payroll taxes from Sept. 1 through the end of the year.

But few employers in Connecticut have taken advantage of Trump’s “tax holiday,” an idea that Congress also has rejected, both in negotiations of previous stimulus bills and in on-again, off-again talks — so far unproductive — over new legislation to respond to the pandemic.

Mark Soycher, human resources counsel for the Connecticut Business & Industry Association, said he has received dozens of phone calls from Connecticut employers who had questions about the program. “I’ve not heard from any employer that they are participating in it,” he said. “Once employers look at it, the see it as a short-term loan.”

Both workers and their employers must pay 6.2% of a worker’s salary in a tax that supports the Social Security trust fund. Trump’s plan would defer those payments for the rest of the year and make them due between Jan. 1 and April 30 — unless Congress acts to forgo the payback. Trump’s plan also defers a 2.9% payroll tax to support Medicare.

The deferral would only apply to workers with an annual salary of less than $104,000 and is voluntary — an employer does not have to agree to defer the taxes.

Soycher said most businesses determined it was not worth the trouble. It would require them to overhaul their payroll processes, which are largely automated. And if an employee leaves a company before he or she repays the deferred taxes, the employer “could be on the hook” for the repayment, Soycher said.

He also said many employers doubted Congress would act to “forgive” the requirement that the deferred taxes be repaid next year.

“Congress has not been able to get its act together for more immediate needs,” he said, including agreement on a new stimulus bill.

Soycher said Connecticut employers also are concerned about the impact of the deferral on the Social Security trust fund, a concern shared by Rep. John Larson, D-1st District, who introduced a largely symbolic bill this month that would block the president from imposing another halt to the collection of Social Security taxes.

“Americans are relying on Social Security more than ever during this pandemic,” Larson said. “They need to know that Social Security is secure and will be there for them.”

Opting out

General Dynamics, parent company of Electric Boat, one of the state’s largest employers, has followed all other large defense contractors in declining to defer taxes.

“The program is optional, and General Dynamics opted out,” Electric Boat spokeswoman Elizabeth Power said.

The casino-owning Mashantucket Pequot Tribal Nation, another large employer in the state, also declined to defer its employees' payroll taxes, tribal spokeswoman Lori Potter said.

An analysis by the U.S. Chamber of Commerce found that a worker earning $75,000 a year would receive an additional $179 every two weeks through the rest of this year. But that same worker would owe about $1,610 next year. A worker making $35,000 would get about $83 more biweekly the rest of this year, and owe a little more than $750 next year.

Although private employers have shied away from adopting the deferral due to its complexity, the federal government is extending it to its employees, including military service members.

At the Naval Submarine Base in Groton, which employs about 6,500 active service members and reservists and about 1,300 civilians, all those whose pay is less than $8,666.66 in any given month are having their taxes deferred. So are about 2,000 employees of the Coast Guard Academy in New London who meet the pay threshold.

On Monday, Democrats on the House Ways and Means Committee, which counts Larson as a member, tweeted their disapproval of deferring the payroll taxes of military personnel.

“Service members are being forced to take the President’s payroll tax deferral, despite the fact that many personnel may not be able to pay it back next year,” the lawmakers tweeted. “This is not how we treat our heroes.”

Ana Radelat is a reporter for The Connecticut Mirror (www.ctmirror.org). Copyright 2020 © The Connecticut Mirror.

aradelat@ctmirror.org

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