General Discussion
In reply to the discussion: Payroll Tax Cut Most horrifying decision ever [View all]Ms. Toad
(33,915 posts)Payroll taxes are functionally just like income taxes, but most people don't realize that, since the withholding is an exact match for the tax due.
Those who might recognise it are the self-employed, or tipped employees.
You owe a fixed percent of your income in FICA taxes. Your router withhold it. It matches. No reconciliation required at the end of the year.
The directive to stop withholding throws that out of whack. You still owe the taxes -the only thing that changes is that your employer didn't collect them as you owed them (and didn't pay them to the government), So come tax time, you will still owe the taxes - and will likely have to write a a 6.2% check to the IRS to pay back that extra money that was in your paycheck from Sept through December.
Trump is using this threat of a significant tax liability to coerce voters to re-elect him. If I'm elected, week make this permanent (i.e. You'll never have to pay these taxes back . . . But if you don't, Biden won't rescue you, and you get a huge tax bill.)
Biden should probably pledge to create a refundable tax credit in the amount of any taxes not withheld by this obscene move. Taxes would be owed, the credit would cover them, the credit would come from the general treasury (ensuring this stunt did not harm social security.). It would, in effect be another stimulus bill. For now, trumps order means you get another small chunk of money in each paycheck -those taxes you owe, but which are not being paid as you go. A retroactive credit means you aren't hurt by it (i.e. Never have to take $ out of your pocket to pay those taxes.)