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WASHINGTON — When President Trump announced that he was unilaterally deferring payroll taxes to bring economic relief to struggling Americans, he and his aides thought it would allow them to frame him as pro-worker.
But the move comes with political risks. Eliminating the payroll tax could jeopardize the funding stream for Social Security, which is one of the government’s most popular programs, providing benefits to 64 million people.
The president has given Democrats an opening to raise Social Security cuts as an issue in the final months of an election in which his support among older voters already appears to be shaky.
The Democratic National Committee amplified the line of attack the next day, blasting out a statement that highlighted “At Least 7 Times Trump Said He Will Permanently Eliminate Funds To Social Security And Medicare.”
Beyond the complicated legal questions about whether Mr. Trump can circumvent Congress by using executive actions to create his own tax-and-spend policies, and the economic debate about whether a payroll tax even helps the right people (it does nothing for the unemployed), the proposal leaves Mr. Trump juggling political priorities.
He is now balancing the potential benefits of giving working people more money in their paychecks — at least temporarily — versus undercutting his own pledge from the 2016 campaign that he would protect entitlement programs.
His economic advisers have insisted that the temporary tax deferral, which Mr. Trump announced on Saturday, will have no effect on Social Security or Medicare. “The president in no way wants to harm those trust funds,” Steven Mnuchin, the Treasury secretary, said on Sunday. “There would be no reduction to those benefits. And the president’s made that very clear.”
But many older Americans — a key base of support for Mr. Trump in the 2016 election — have already grown wary of him because of their anxiety over the coronavirus, and may not be convinced by those promises. Adding to the confusion is that Trump campaign advisers are saying that the president wants to go further and pass a permanent payroll tax cut if he is re-elected. The administration has not explained how Social Security would be funded if a tax dedicated to it evaporates.
When it comes to cutting to Social Security, “is that really a debate you want to have?” said David Axelrod, a former top adviser to President Barack Obama.
Trump advisers said they expected Democrats to “demagogue” on Social Security. But they said they expected those attacks would fall flat, partly because the specter of entitlement cuts has been raised so often as to lose meaning, and because he had promised since his 2016 campaign that he would not touch Social Security and Medicare.
“There are a lot of Americans who have gotten a little bit acclimated to accusations to cuts to Social Security,” said Marc Short, the chief of staff to Vice President Mike Pence. “The president has certainly maintained consistently that that’s not something he wants to do.”
Trump campaign officials also said Democrats would have to defend their own history of supporting payroll tax cuts. “Joe Biden and Nancy Pelosi enthusiastically embraced payroll tax relief under President Obama, proving that their opposition now is strictly political,” said Tim Murtaugh, communications director for the Trump campaign.
And Stephen Moore, a longtime outside economic adviser to the president, said the political calculation was more difficult for Democrats than for the president. “Trump can say to Biden: ‘You’re a blue-collar worker? I just gave them a 7.5 percent pay raise and you’re against it,’” he said. “Once people start getting money in their checks, it’s going to be hard for Democrats to say you shouldn’t have that money.”
Many businesses owners themselves, however, have been cool to Mr. Trump’s action, uncertain about its implementation and concerned that the deferral of taxes simply means a bigger and more complicated tax bill in 2021. Some may decide to continue withholding the taxes anyway on the assumption they will eventually be due.
The deferral announced by Mr. Trump applies to the Social Security portion of the payroll taxes that employees pay, and covers the period from September through December; Medicare payroll taxes are untouched.
It is unclear what ultimate effect Mr. Trump’s action will have, given that the president is only delaying the Social Security payroll taxes — not wiping out what is owed. Eliminating that tax liability would require congressional approval, and lawmakers from both parties have shown little desire to cut payroll taxes.
“In its simplest form, the deferral of employee payroll taxes from September through December is a lot of trouble for negligible benefit,” said Paul N. Van de Water, a senior fellow at the Center on Budget and Policy Priorities, a left-leaning research organization.
He also threw cold water on a Trump-friendly talking point. “It’s not a tax cut,” he said. “That’s just wrong. It could turn into a tax cut if Congress later comes back and decides to do so. But Trump can’t cut taxes on his own.”
That the president’s action merely defers payroll taxes for some employees — workers who make less than $104,000 annually — without eliminating them, also takes some of the potency out of Democrats’ warnings that Mr. Trump is putting the future of Social Security in danger.
In fact, Congress has already taken a similar action in response to the pandemic, with support from both parties. Usually, employees and employers each pay a Social Security payroll tax of 6.2 percent of wages, or 12.4 percent when put together. The $2.2 trillion stimulus law approved in March — with support from Republicans and Democrats alike — allowed employers to delay their portion of the Social Security payroll tax.
Mr. Trump did not help matters with his imprecise explanation of what, exactly, he wanted to do with the payroll tax, which he suggested on Saturday he wanted to “terminate.” Social Security is mostly funded by payroll taxes, and getting rid of them would be a drastic change to the federal government’s revenue streams.
Larry Kudlow, Mr. Trump’s top economic adviser, said on Sunday that the president was referring to forgiving the payroll taxes that are deferred, explaining, “He did not mean that he’s eliminating the Social Security tax.” But on Monday, Mr. Trump used similar language, saying that if he wins re-election, “we will be ending that tax; we’ll be terminating that tax.”
And his campaign advisers have been eager to highlight a sweeping action. “This is actually the biggest news of the day: President Trump said if he is re-elected, he will look into terminating the payroll tax permanently!” tweeted the campaign’s senior legal adviser, Jenna Ellis.
Whatever the president meant, just broaching the subject is giving Democrats additional ammunition in their effort to appeal to older Americans.
The Democratic Congressional Campaign Committee demanded to know if Republicans supported Mr. Trump’s effort to, as the committee put it, “deliver a devastating blow to seniors already reeling from this health and economic crisis.” And the Democratic National Committee is planning efforts in battleground states to draw attention to the matter.
The president’s move also allowed Mr. Biden to go on the offensive on a subject that has been a potential vulnerability for him. In the Democratic primary, Mr. Biden came under criticism over his record on Social Security during his lengthy career in public office, such as his support in the 1980s for a freeze on government spending, including Social Security.
After the president’s action on payroll taxes, the Trump campaign tried to flip the issue on Mr. Biden, reprising the criticism he faced in the primary. The campaign sent out an email calling Mr. Biden “the only candidate in the race who has tried to cut Social Security benefits.”
Before Mr. Trump’s unilateral action, Senator Charles E. Grassley, Republican of Iowa and the chairman of the Senate Finance Committee, which oversees tax policy, said he empathized with Mr. Trump’s efforts to provide tax cuts as administration officials struggled to break through the negotiations impasse with Democrats. But he questioned the merits of cutting the payroll tax.
“I think the best tax policy is the policy that’s long term, and that wouldn’t be long term,” Mr. Grassley said on Thursday.
Mr. Moore, in an interview, conceded that Mr. Grassley’s opposition was problematic for the president. “The only one who really matters a lot in this debate is Grassley,” he said. “It’s hard to get his mind to change.”
Annie Karni reported from Washington, and Thomas Kaplan from Wilmington, Del. Emily Cochrane contributed reporting from Washington.
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