GAO clears way for Democrats to try to overturn Trump’s payroll tax deferral

The Government Accountability Office (GAO) on Tuesday cleared the way for Democrats to try to overturn IRS guidance implementing President Trump’s payroll tax deferral order.

In a letter Tuesday to Senate Minority Leader Charles Schumer (D-N.Y.) and Senate Finance Committee ranking member Ron Wyden (D-Ore.), GAO General Counsel Thomas Armstrong said the office considers the IRS guidance to be a rule for purposes of the Congressional Review Act (CRA).

The finding that the guidance is a rule under the CRA allows Senate Democrats to force a vote on a resolution to disapprove of the IRS notice. CRA resolutions can get a Senate floor vote with signatures from 30 senators.

Rep. John Larson (D-Conn.), the chairman of a House subcommittee on Social Security, has already introduced a CRA resolution to overturn the guidance in the House.

Under the IRS guidance, released late last month, employers can choose to stop withholding employee-side Social Security payroll taxes through the end of the year for workers making under $4,000 biweekly. Employers will then need to recoup the deferred taxes by increasing the amount withheld from workers’ paychecks in the first few months of 2021.

Democrats have strongly criticized Trump’s payroll tax deferral, arguing that it will hurt workers who end up with smaller paychecks next year. Schumer and Wyden said earlier this month that they wanted a GAO determination on whether the IRS guidance was a rule for CRA purposes in order 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.” 

Armstrong said the GAO considers the guidance to be a rule because the IRS submitted its guidance to the office under the CRA. 

While the GAO letter allows Democrats to proceed with their effort to overturn the payroll tax deferral guidance, the effort is unlikely to succeed. A resolution to overturn the guidance needs a majority to pass the Senate, and a majority of senators are Republicans. Additionally, Trump would likely veto a resolution to overturn the guidance.

Wyden said in a statement Tuesday that he appreciated the GAO’s letter.

“Senator Schumer and I will look at next steps,” he said.

Updated at 7:34 p.m.