Trump's Payroll Tax Cut Could Save Me $21,000. It's Still Not the Answer.
The coronavirus pandemic has sent the U.S. economy into a tailspin. Gross domestic product was down in the first quarter, and declines in employment have reached historic levels. Even though the federal government has already passed three major measures to try to address the impacts of the pandemic on the economy, the White House and many lawmakers are still looking for more ways to put money into the hands of Americans.
Since the coronavirus crisis began, President Trump has been an advocate of a payroll tax holiday. As it happens, I might be one of the biggest winners from such a move. However, there are several reasons that better solutions exist to the economic problems facing hundreds of millions of Americans than cutting payroll taxes that go to fund Social Security and Medicare.
From a personal perspective, reducing payroll taxes for the remainder of 2020 -- which is one possible way that the White House might seek to implement such a cut -- would be a huge windfall. As a self-employed independent contractor, I pay both the employee and employer share of payroll taxes. For regular employees, 7.65% of your pay up to $137,700 in 2020 gets taken out of your paychecks, which includes the 6.2% tax for Social Security and 1.45% for Medicare. However, your employer has to pay 7.65% in additional payroll taxes. That adds up to the 15.3% in self-employment tax that independent contractors pay.
Source Fool.com
