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

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!