Senate Democrats take step toward vote on overturning Trump’s payroll-tax deferral

Senate Democrats on Wednesday took a step toward forcing a vote on overturning President Trump’s payroll-tax deferral.

In a letter sent to the Government Accountability Office (GAO), Senate Minority Leader Charles Schumer (D-N.Y.) and Senate Finance Committee ranking member Ron Wyden (D-Ore.) asked for an expedited determination about whether the Treasury Department and IRS’s guidance implementing the payroll-tax deferral is a “rule” for purposes of the Congressional Review Act (CRA).

Under the CRA, Congress can vote on measures to disapprove of recently issued rules produced by federal agencies.

“This expedited review and determination by GAO is critical and will allow us to move forward with the CRA process and ultimately protect lower and middle-income Americans’ hard-earned wages and retirees’ Social Security benefits from Trump’s plan and we hope every Senator will support this effort,” the senators said in a statement.

Trump on Aug. 8 issued an order directing the Treasury to allow employers to defer withholding and payment of employees’ Social Security payroll taxes, in an effort to provide relief to workers during the coronavirus pandemic. Treasury and the IRS issued a notice last week implementing the order.

The guidance provides that employers can opt to stop withholding Social Security payroll taxes from Sept. 1 through Dec. 31 for workers making under $4,000 biweekly. Employers would then collect the deferred taxes by increasing the amount of payroll taxes withheld from their employees’ paychecks from Jan. 1 through April 30.

The payroll-tax deferral has drawn criticism from Democratic lawmakers and business groups since it would result in employees receiving smaller than usual paychecks at the start of next year. Many private-sector employers will likely not participate in the deferral, but federal workers are set to have their taxes deferred.

“Implementation of this Treasury and IRS guidance will result in significant, material consequences for workers starting early next year – particularly lower and middle-income earners – whose employers elect to temporarily defer the employee portion of FICA payroll taxes,” Schumer and Wyden wrote in their letter to the GAO.

Schumer and Wyden argued that the guidance should be considered a rule for CRA purposes because the act defines that term broadly to encompass a range of actions by federal agencies. They noted that the GAO has determined that agency actions don’t need to go through a comment period to be considered rules under the Congressional Review Act.

The senators asked the GAO to respond to their letter by Sept. 22.

The Wall Street Journal first reported on Senate Democrats’ effort.

CRA resolutions can be put on the Senate calendar for a vote with signatures from 30 senators, and need a simple majority to pass.

Senate Democrats could face challenges in getting the votes needed to pass a CRA resolution on the payroll-tax deferral guidance because a majority of senators are Republicans. Additionally, Trump can veto CRA resolutions.

“Apparently challenging everything the president tries to do in the face of their obstruction is all Democrats can think about,” a spokesperson for Senate Finance Committee Chairman Chuck Grassley (R-Iowa) said. “If they would put even part of that energy into a compromise relief package, we could really help families, workers and the businesses that employ them.”

Rep. John Larson (D-Conn.), the chairman of the House Ways and Means Committee’s subcommittee on Social Security, said Wednesday evening that he will introduce legislation to block Trump’s order and work with Senate Democrats on the CRA resolution.

“This order is reckless, unworkable, and gives new meaning to the term ‘surprise billing,'” Larson said in a statement. “Early next year Americans will be required by Trump to pay double to make up for this pointless charade.”

— Updated at 9:45 p.m.