White House denies exploring payroll tax cut to offset worsening economy

The White House is denying that it’s considering a temporary payroll tax cut to help boost the economy after The Washington Post reported that several senior administration officials have been discussing the idea.

A White House official said in a statement that “cutting payroll taxes is not something under consideration at this time.” 

{mosads}Senate Finance Committee Chairman Chuck Grassley (R-Iowa) has not discussed a possible payroll tax cut with the administration, according to a spokesman for the senator.

“At this point, recession seems more of a political wish by Democrats than an economic reality,” Grassley spokesman Michael Zona said.

The Post, citing three people familiar with the discussions, reported Monday that top White House officials are weighing whether to push Congress to pass a temporary payroll tax cut in an effort to stave off a slowing economy.

Talks about a potential payroll tax cut are in their early stages and no decision has been made about whether to press for the cut, according to the Post.

The New York Times later also reported that the White House was considering a potential payroll tax cut and was also mulling whether to reverse some of President Trump’s tariffs.

The report, which cited people familiar with the discussions, said economists within the administration have drafted a white paper for a potential payroll tax cut.

The Times also reported that Trump had not been been briefed on the idea, and said it remained unclear whether he would support such a plan. 

The reported talks about a possible tax-cut push come as warnings of a recession on the horizon have been growing. President Trump and his aides have been trying to reassure the public about the economy, with Trump accusing the news media of manufacturing a crisis and “doing everything they can to crash the economy” so he doesn’t win in 2020.

A souring economy could be a problem for Trump politically ahead of the 2020 election, since polls have shown that more voters approve of the president’s performance on the economy than do of his overall job performance.

People pay payroll taxes in order to finance Social Security and Medicare. Former President Obama had enacted a temporary payroll tax cut during his presidency in an effort to boost the economy.

Cutting these taxes could temporarily help the middle class, but could also increase the deficit and possibly hurt the social safety net programs they fund.

Trump enacted a law that cut individual and corporate income tax rates in late 2017, but Democrats have attacked that law, arguing that it mainly helps corporations and the wealthy.

While the White House is refuting that they’re eyeing a payroll tax cut, administration officials are also saying that more tax cuts are on the table.

When National Economic Council Director Larry Kudlow was asked on “Fox News Sunday” if the White House was still considering the 10-percent middle-class tax cut Trump floated late last year, Kudlow replied, “We’re looking at it. Tax cuts 2.0, we are looking at all that.”

When the House was under GOP control last year, it passed a package known as “tax cuts 2.0” that would have made permanent the 2017 law’s cuts for individuals, but the Senate didn’t take it up.

The Trump administration has also been considering whether to take executive action to cut taxes for investors by indexing capital gains to inflation.

Many Republicans argue that such an action could boost the economy, but Democrats argue that the administration doesn’t have the authority to index capital gains on its own and that such an action would mostly help the rich.

— Updated at 6:26 p.m.