Trump's payroll tax cuts won't help those hit hardest by coronavirus

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A payroll tax cut 'would not be well-targeted to those most vulnerable to economic disruption," says the Tax Foundation.

Donald Trump continues to insist that a payroll tax cut is needed to deal with the coronavirus pandemic, even though economists say it won't help those most directly impacted by the outbreak.

"If you want to get money into the hands of people quickly & efficiently, let them have the full money that they earned, APPROVE A PAYROLL TAX CUT until the end of the year, December 31," Trump tweeted Friday morning. "Then you are doing something that is really meaningful. Only that will make a big difference!"

It was the sixth time Trump tweeted about a payroll tax cut this month, but experts doubt such a measure is the most effective way to respond to the current crisis.

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An analysis by the Tax Foundation found that a payroll tax cut "would not be well-targeted to those most vulnerable to economic disruption."

A payroll tax cut only helps people who have jobs, but the Tax Foundation points out that low-income and hourly workers are those most likely to lose their jobs as the economy continues to veer towards a recession.

Elderly people seem to be experiencing the biggest health impact of COVID-19, the disease caused by the new coronavirus. As the Tax Foundation noted, retirees "are not in the labor force and will not benefit from the tax cut."

Josh Bivens, research director at the Economic Policy Institute, said in an email Friday that the amount of money such a tax cut would cost — roughly $800 billion — is "the relative size and scale that we need," but nonetheless criticized the idea.

A payroll tax cut "is very poorly targeted," he said, adding that the "employer-side cut is a pure windfall to employers and won't go to workers."

Bivens also criticized the speed at which such a measure would take place, saying it would raise paychecks by less than 10% per week.

"Something quicker and bigger is needed," he added.

There are other options that could more effectively help a larger number of people, Seth Hanlon, a senior fellow with the Center for American Progress, said in a Friday email.

Hanlon said emergency unemployment benefits, more nutrition assistance, paid leave, assistance to states to address the epidemic, and an expansion of small business credit "are much more targeted ways to deliver aid to those most affected."

He also suggested direct payments to all households, a measure that would reach people who are out of work and seniors, as well as those in the workforce.

In a March 9 article, Bivens also made the case for direct payments to households, noting that former President George W. Bush did so in February 2008. This time around, Bivens suggested $1,000 for each individual and $500 per child, and recommended double that amount for lower-income households.

Beyond the stock market tumbling, the economic impacts of the outbreak are already hitting some industries, according to a Wednesday report in the Washington Post. So far, the biggest impact is among entry-level workers, young workers, and those engaged in the gig economy.

"We will definitely see an effect on jobs from the coronavirus, and it could be pretty large in leisure and hospitality," Julia Pollak, labor economist at ZipRecruiter, told the Post. "The first thing we’ll see is a reduction in hours. We hear many reports of employers canceling staff everywhere except in health care."

As of March 12, there are more than 1,200 confirmed COVID-19 cases in the United States, and at least 36 people have died, according to data compiled by the National Governors Association.

Published with permission of The American Independent Foundation.