More than a million employees of the federal government and some private-sector workers are seeing smaller paychecks in January as they must now repay the Social Security taxes that President Trump delayed collection of from September through December.
Trump characterized the move as a tax cut and promised that it would not have to be repaid if he won reelection. In reality, Trump’s executive action in August was a tax loan that workers would have to repay. Only Congress can approve tax cuts.
“This was a payroll tax loan as opposed to a payroll tax cut,” said Janet Holtzblatt, a senior fellow at the Urban-Brookings Tax Policy Center. “Now people are getting hit with a lower paycheck in January. We knew the money would start coming due the same time the Christmas bills came due.”
Most businesses, along with the U.S. Postal Service, Congress and the Supreme Court, declined to participate because they saw the move as confusing and potentially harmful to workers and employers. But federal workers in the executive branch making less than $104,000 a year did not have a choice. They received extra money in late 2020 and now they have to repay the loan, even as many continue to struggle during the coronavirus pandemic.
Timothy James is among the many frustrated federal workers trying to adjust to a thinner paycheck. He gets paid biweekly and said his first paycheck in January was $300 less. James is a data analyst and father of two. He lost his second job during the pandemic. He and his wife just had a difficult discussion about what cuts they can make in their budget. They have asked for a temporary break on their car payments but aren’t sure if they will be approved.
“I feel like I got a pay cut even though I just had a star review from my manager. I feel like I’m being punished. It’s horrible,” James said. “Nobody in their right mind should have thought this would be a good idea.”
Originally, the deferred taxes were supposed to be repaid from January through April, but the funding bills that Congress passed at the end of 2020 allowed the repayments to be spread over 12 months in an effort to ease the burden. The legislation also included a 1 percent raise for federal workers and a $600 stimulus payment for Americans making less than $75,000 a year.
Federal employee unions applauded the 12-month repayment period, but they blamed the Trump administration for poorly communicating the situation to workers and forcing federal employees to participate in the first place.
“Hopefully we’ll never have another president of the United States who’s intent on singling out his own workforce for a bad policy that was clearly intended to be an election-year ploy,” said Tony Reardon, president of the National Treasury Employees Union, adding: “The communication about this entire tax deferral from the very outset has been severely lacking.”
American Federation of Government Employees President Everett Kelley called the tax scheme “one more example of the way President Trump, his administration and his allies have bent policy and the truth to his personal political benefit, leaving everyday working Americans to deal with the consequences and pick up the pieces — whether it’s an unexpected tax bill just after the holidays or the broken glass on the floor of the Capitol.”
The Trump administration blamed Congress for not making the payroll tax break permanent.
“Any hardship you write about is attributable only to Congress. The president, as he did throughout the pandemic, took decisive action under his authorities to provide relief to Americans, and called on Congress to address the issue. Congress made their decision,” said Edie Heipel, deputy press secretary for the White House Office of Management and Budget.
Trump had championed a payroll tax cut for all American workers over the summer as a way to get more money into people’s pockets during the pandemic. But Democrats and even some Republicans panned the idea, saying it helps only those currently on the job. The United States has nearly 20 million people receiving unemployment aid.
For James, the federal worker, the biggest frustration is that his wife’s firm gave workers a choice on the tax break. She declined. But James was never given a choice.
“If I had been given a choice, I would have said: ‘Heck no. I don’t want this,’ ” James said.