More than a million troops to get temporary pay hike with payroll tax deferral — but there’s a catch

| September 9, 2020

Jeff LPH 3 reminds me we need to talk about this payroll tax deferral. From Military Times;

More than a million military members earning $8,666.66 or less per month will see their paychecks increase by 6.2 percent of their basic pay beginning with the mid-September paycheck — but get ready for the bite out of your paycheck when you have to pay it back starting in January.

This affects all enlisted members, virtually all warrant officers and many officers, to include everyone up through the grade of O-4. Officers in the grade of O-5 with less than 16 years of service, and those in the grade of O-6 with less than 14 years of service are affected. Those who earn more than $8,666.66 a month will not have their Social Security taxes deferred — they’ll continue to pay the payroll taxes.

So what is this “deferral?” Read it yourself here. The gist is that the President has directed the Secretary of the Treasury to temporarily (starting 1 Sept thru the end of the calendar year) not collect federal income taxes from those making less than $8,666/mo.

Why do this? Well, it’s in response to the inability for Congress to come to an agreement on another round of COVID stimulus. It’s also a political move. As we enter the debates, Trump can point to this order that immediately allows for everyone to get a bump in their pocket books come payday. He acted when Congress was ineffective. Trump remembers the power of the pen and the phone.

So what’s the catch? More money in the paycheck is a good thing, right? It’s like a tax cut, but it is not a tax cut. It’s a deferral. So at the end of the year, the money will have to be paid back. Unless, and that’s a pretty big unless, Congress gets their shit together and makes this temporary deferment a permanent reprieve. If they don’t (and they likely won’t), then the taxes will be required by the filing deadline of 15 April, 2021.

I think Trump is playing the long game here. He’s thinking that as the next few months pass there will be immense political pressure on Congress, and in particular Pelosi, to make this four month tax vacation a law.

What you’re supposed to be doing here is setting that 6.2% aside (or better yet, investing it). We all know that well over 80% of the people making under the limit are living paycheck to paycheck. They’ll notice a few extra bucks each week and go out and use them (which is the intent of the order really). Paying it back is a tomorrow people problem. Once people realize that they have to pay it back, there’ll be much more pressure on Congress.

Both sides seem entrenched to wait out the election. Once again, 4 November can’t come soon enough. Though the way things are shaping up, it’ll be like Y2K all over again and we won’t know for weeks who won what.

 

Category: "The Floggings Will Continue Until Morale Improves", "Your Tax Dollars At Work", 2020 Election, Congress sucks, Guest Link, Politics, Trump!

Comments (12)

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  1. Ret_25X says:

    from the IRS website:

    The Department of Treasury and Internal Revenue Service today issued guidance (PDF) implementing the Presidential Memorandum issued on August 8, 2020, allowing employers to defer withholding and payment of the employee’s portion of the Social Security tax if the employee’s wages are below a certain amount.

    Notice 2020-65, posted today on IRS.gov, makes relief available for employers and generally applies to wages paid starting September 1, 2020, through December 31, 2020.

    The employee Social Security tax deferral may apply to payments of taxable wages to an employee that are less than $4,000 during a bi-weekly pay period, with each pay period considered separately. No deferral is available for any payment to an employee of taxable wages of $4,000 or above for a bi-weekly pay period.

    Today’s notice postpones the time for employers to withhold and pay employee Social Security taxes.

    It is important to note that the deferral is not optional for federal employees (which probably includes the military).

    Also, this is not income tax deferral. This is the OASDI withholding that covers social security, medicare, and SSDI. Note that these programs are fiscally bankrupt now, so the long term effect of not paying in is likely immaterial at this level of deficit spending.

    https://www.irs.gov/coronavirus-tax-relief-and-economic-impact-payments <—the only source for tax related information you can actually trust these days.

    Weird, isn't it?

  2. 5th/77th FA says:

    “…Congress gets their sh^t together….” Bwwaaahahahahahahahahahaha! Yeah, right! DaHell you smoking? No, you musta took the brown acid and having a bad trip. Not.Gonna.Happen!

    “…immense political pressure…” Ha! Ain’t.Gonna.Matter. Not from the Military anyhow. They don’t give a damn about the Service Member, except maybe at election time. They may see political pressure from all of the Swamp Dwelling pigs slurping away at the grunmint trough.

    No matter which way this goes, you and I, the taxpayer, will pay for it.

  3. 26Limabeans says:

    “$8,666.66 or less per month” WTF? I was making $330 a month as an E-5 in 1970.
    But……it was tax free!

  4. Claw says:

    PFC got $180.90 per month in 1971. Got a whopper of a pay raise when I was promoted to Spec4 effective 1 Jan 72, base pay went up to $346.80. Hostile Fire Pay ($65.00) and Flight Pay ($55.00) stayed the same, but Foreign Duty Pay went up from $9.00 to $13.00.

    So, Yeah, we were living fat and happy on those tax-free dollars./s

    • Claw says:

      But, actually never saw all that “Big Money.” Whenever pay day rolled around in Vietnam Times, I only ever got $60.00 in MPC and all the rest went home to Mom.

      But when the biggest cost was $1.70 a carton for cigarettes, beer was a nickel and $3.00 a month was my cut to the Hooch Maid, $60.00 was more than enough./s

  5. Ex-PH2 says:

    “…it’ll be like Y2K all over again and we won’t know for weeks who won what.”

    Omigod!!! Are you telling us that we are going to be stuck in this nightmare that will repeat itself over and over and over until we’re ready to scream????

    Is there an open lot available on Mars? I’m moving.

    No, I do NOT believe the democraps will accept either the popular or the electoral vote. Like the spoiled brats some of them have shown themselves to be, they will do everything including banging their heads on the walls and rolling on the floor, to let us know just exactly what spoiled brats they are.

    • Mason says:

      Is there an open lot available on Mars? I’m moving.

      Elon Musk will send you, but there’s no coming back. 😉

  6. Green Thumb says:

    Uncle Sam wants his money back…Uncle Sam takes it fast.

    Hope Joe gets that.

  7. The Dead Man says:

    For what it’s worth, internally we were told there’s a bill floating that might waive having to pay it back. First thing we asked in-office was opting out of that since none of us want to bother sending cash back in, if we calculate wrong it can cost a job.

    If I see anything about it update wise, I’ll shoot off an email to the admin account or something.